Reps Probe Use of USD as Legal Tender for Domestic Transactions

The House of Representatives on Tuesday, October 10, mandated the Committee on Banking Regulation to investigate the use of the United States Dollar and other foreign currencies as legal tender for domestic transactions in Nigeria.

The House also called on the Central Bank of Nigeria (CBN) to address the impact of the failing Naira against the Dollar and other currencies.

It urged the CBN to implement monetary policy adjustments to stabilise the currency, address speculative activities in the forex market, and increase the withdrawal limit of the naira to reduce the pressure on dollars and other foreign currencies.

It also urged the Federal Government to formulate policies and structural reforms to reduce corruption and promote economic diversification within the nation’s economy.

The House further urged the Federal Government to promote exportation and reduce importation by enhancing foreign investors’ confidence in its fiscal and monetary policies.

It mandated the Committees on Banking Regulations and National Security and Intelligence to interface with the Central Bank of Nigeria with the purpose of initiating compliance strategies.

These resolutions followed the adoption of a motion moved by Hon. Ismaila Haruna Dabo.

The House noted that in June 2023, the President of the Federal Republic of Nigeria, Bola Ahmad Tinubu, through the Central Bank of Nigeria announced changes to the country’s foreign exchange market.

This, it said, was so that the foreign currencies could now be bought and sold at rates determined by the market and not by the CBN.

It also noted that the President’s intention was to allow market forces to determine the naira value, but the alarming exchange rate had impacted Nigeria’s economy, causing untold hardship due to increased demand for dollars and dollar shortage.

The House said about 90 percent of Nigeria’s total export earnings were from oil, which was the mainstay of the country’s economy, noting that changes in the price of oil around the world had a big impact on the country’s foreign exchange market.

This, the House said, explained why the naira had continued to depreciate.

The House said Nigeria’s foreign exchange inflows were lagging, despite unification in June, with high demand for foreign currency and limited access to official markets incentivizing black market purchases.

The House said the naira has lost a greater percent of its value against the dollar, falling from N778.602/$ as of September 2023, and nearly N1000/$ at the parallel market.

The House said this made it the first time Nigeria had liberalised the foreign exchange market.

The motion reads: “The House is worried about inflation and the cost of living, depreciating naira makes imported goods more expensive, leading to higher inflation rates. This increased cost of living disproportionately affects the most vulnerable citizens, as they struggle to afford basic necessities, which are now glaring across the country.

“The House is also worried about the reduction in investment, as the value of the naira continues to lose value and depreciates against the dollar and other foreign currencies, foreign investors may be deterred from investing in Nigeria, fearing potential currency losses, which is capable of stunting economic growth and hindering the creation of new job opportunities for unemployed Nigerian youth.”

“The House is aware that a weaker and depreciating Naira could increase Nigeria’s external debt servicing costs, potentially reducing government spending on critical sectors like healthcare and education.”

“The House is also aware that the Central Bank of Nigeria (CBN) frequently uses its foreign reserves to stabilise the naira, but this can deplete its reserves, making the country vulnerable to economic shocks.”

“The House is cognizant that addressing Nigeria’s financial challenges requires collective responsibility from all stakeholders, including Parliament, which has been the voice of the common man.”