Nigeria’s central bank voiced alarm on Tuesday at an apparent surge in demand for cash dollars linked to political activities ahead of elections not due until 2015, saying that they could indicate money laundering.
Governor Lamido Sanusi made the remarks after the bank’s twice monthly Monetary Policy Committee meeting, at which it held its main rate at 12 percent for the 12th time in a row, citing a stabilising naira and inflation.
|CBN Gov, Sanusi|
Sanusi said there had been “strong foreign exchange demand pressures which are not necessarily linked to an increase in the import of goods.”
Elections are scheduled for 2015 and politicians often spend massively on patronage to secure seats or pay off rivals. At least some of it is acquired illicitly through corruption or links to criminal rackets like oil theft or kidnapping.
“This non-import-related demand was linked to the build up of political activities in the country,” Sanusi said, adding that it was leading to a “dollarisation of the economy by the political class.”
“There is something absolutely wrong with bureaux de changes buying hundreds of millions of dollars and not being able to account for them… We think these monies are part of a money laundering exercise and we will have to deal with it.”
Measures to be announced soon could include imposing restrictions on dollar cash withdrawals, he said.
The bank has come under pressure in the past to cut rates from businesses who say that would stimulate lending. It has resisted, however, arguing that it is only by staying the course despite such pressure that the economy has stabilised.
He said a stable naira had been “underscored by the policy of intervention to improve supply … and the very tight monetary conditions maintained since the last MPC meeting”.
He also said those conditions had had an impact on inflation, which fell to another five-year low in August.
The naira has been under regular selling pressure from fleeing hot money and strong dollar demand since June, but has gradually recovered due to frequent central bank forex sales.
That has not been without its costs. Nigeria’s foreign exchange reserves declined 2.34 percent month-on-month to $45.95 billion by Sept. 20, their lowest in seven and a half months, the latest central bank data shows.
Sanusi acknowledged the fall in reserves but reiterated that the bank would resist pressure to devalue the naira, something it last had to do in November 2011.
“I do not see any benefit in devaluing the currency at this point in time. It will not improve our export earnings, it will not reduce imports that are fundamentally inelastic,” like fuel or food, he said. “We will use the reserves. We will not unless we are forced to allow the naira to weaken.”