Nigeria’s central bank has announced new measures to curb currency speculation as part of an effort to defend the naira which has been hit hard by the collapse in global oil prices.
The move comes after a currency devaluation and a cut in the 2015 growth forecast and less than two months before general elections, with President Goodluck Jonathan trying to assure voters that Nigeria’s financial future remains healthy. Customers who purchase foreign currency through the interbank market or an authorized trader must use the funds within 48-hours, said a statement issued by the Central Bank of Nigeria (CBN).
“Failing (this), such funds must be returned to the CBN for re-purchase at the Bank’s buying rate,” it said, warning that sanctions would be imposed on those who fail to comply.
The measure targets speculators who seek profit by buying up foreign currency in hopes that the naira will continue to fall.
Nigeria, Africa’s largest oil producer, depends on crude exports for 70 percent of government revenue and some 90 percent of its foreign exchange earnings.
The government has said that plummeting crude prices have put huge strains on revenue and have announced a series of measures to respond to the crisis.
Last month the CBN devalued the naira by eight percent to a new target rate of 168 naira to the dollar. But the currency’s street value was much weaker than that, with a dollar fetching more than 180 nairas.
Jonathan warned Tuesday that Nigeria could be forced to cut further the amount of oil revenue it uses for government spending if the global crude price continued to plummet.
Abuja sets a so-called benchmark oil price, which has been slashed to $65 from $78 earlier this year. Revenue from oil exports up to that price go into general government spending.
Crude prices have halved since June. US benchmark West Texas Intermediate (WTI) for January delivery was trading at $54.84 on Friday, while deals for Brent crude for February were done at $59.59.
Finance Minister Ngozi Okonjo-Iweala this week slashed the government’s 2015 growth forecast to 5.5 percent from 6.35 percent.
Anticipated government spending in 2014 of 4.6 trillion naira ($24 billion) will also slide to 4.3 trillion naira next year, she said.
But experts say that belt-tightening in an election year could cause massive headaches for the ruling Peoples Democratic Party (PDP).
The governments of all 36 Nigerian states last month asked for an addition $2 billion in federal money, saying their allocations had dwindled because of the revenue crunch and they were struggling to pay salaries and meet other commitments.
Analysts say the PDP has a long track record of using public money to fund its campaigns and the weak federal purse could prove a boon to the opposition.
Jonathan’s record on national security has deteriorated each week as his repeated assurances of victory over Boko Haram insurgents have all proved hollow.
The PDP had hoped that economic growth and stability could prove attractive to voters, especially since Jonathan’s opponent, ex-military dictator Muhammadu Buhari, has questionable economic credentials.
