Prohibition of Foreign Currency Use in Nigeria: Senate’s First Reading
The Nigerian Senate has introduced a bill aiming to prohibit the use of foreign currencies for transactions within the country. Titled “A Bill for an Act to Alter the Central Bank of Nigeria Act, 2007, No. 7, to Prohibit the Use of Foreign Currencies for Remuneration and Other Related Matters,” the legislation passed its first reading on December 17, 2024.
Sponsored by Senator Ned Munir Nwoko, Chairman of the Senate Committee on Reparations and Repatriation, the bill seeks to mandate that all payments, including salaries and transactions, be conducted exclusively in the Nigerian Naira.
Senator Nwoko argues that the prevalent use of foreign currencies, such as the U.S. Dollar and British Pound Sterling, undermines the Naira’s value and perpetuates economic challenges, describing it as a “colonial relic” hindering Nigeria’s economic independence.
Key provisions of the proposed legislation include:
- Mandatory Use of Naira: All domestic payments, including salaries and bonuses, must be made in Naira.
- Export Transactions: Exports, including crude oil sales, would be required to be paid for in Naira, compelling international buyers to purchase the currency, potentially increasing its demand and value.
- Elimination of Informal Currency Markets: The bill proposes abolishing informal currency markets that undermine the formal economy and encourage unethical practices like round-tripping by banks.
- Domestic Storage of Foreign Reserves: Advocates for storing Nigeria’s foreign reserves domestically to safeguard economic sovereignty and reduce exposure to external vulnerabilities.
This legislative move aligns with previous warnings from the Central Bank of Nigeria (CBN) against pricing goods and services in foreign currencies, emphasizing that the Naira remains the legal tender in Nigeria. The CBN Act of 2007 stipulates penalties for contraventions, including fines or imprisonment.
The bill’s proponents believe that enforcing the exclusive use of the Naira will strengthen its value, reduce economic dependency on foreign currencies, and promote economic stability.
However, the bill must undergo further readings and deliberations before it can become law.