Opinion: Should domiciliary accounts be banned in Nigeria?

Opinion: Should domiciliary accounts be banned in Nigeria?

Amara Nwankpa @Nwankpa_A, the Director of Public Policy Initiatives at Yar'adua:s foundation replies Federal Lawmaker, Ibrahim Obanikoro on his call for CBN to close all Domiciliary Accounts in Nigeria. Recall that Ibrahim Obanikoro, a House of Representatives member, had tweeted:

"I am not the CBN Governor but at this moment, I'm of the opinion that CBN should mandate that all dorm accounts be closed for the next 12 months. Let's see the effect on the Naira. After all you can't go to any of the Western world and open a foreign currency account. Your opinion."

In a reply to Ibrahim Obanikoro's tweet, Amara Nwankpa wrote:

The series of tweets on "Dorm" accounts from this account illustrate how financial ignorance and economic illiteracy can end up doing unintended and irreversible damage to the economy.

1. Lets start with the fact that the author of this tweet - who is also a member of Nigeria's parliament - calls it "Dorm" accounts. It suggests ignorance of the name and the policy intention of these kinds of accounts. The correct name is "Dom", short for Domiciliary Accounts.

2. Dom accounts are a key aspect of the policy to incentivize potential forex inflows from autonomous sources into Nigeria by allowing autonomous recipients of these funds to DOMICILE them in Nigerian banks at close to the value at which the transaction was initiated.

3. "Autonomous Sources" are the primary source of forex inflows into Nigeria. In the Q4 2014, inflow through autonomous sources amounted to US$15.43 billion, which accounted for 65.4 per cent of the total inflow through the economy.

4. The CBN recognized this when, in late 2020, it issued directives reinforcing the rights of international money transfer beneficiaries to have unfettered access to their $$. Consequently, inflow improved. CBN even started and continued a N5 for each dollar received promotion

5. It is a no-brainer really. If you want people to bring Forex into Nigeria you have to create a system that assures them, at the very least, that the money they bring in will have the value it would have had if it were kept outside Nigeria.

The 5 points above is why the quoted tweet is dangerous and could have an effect opposite to what the stated intention is. It is a direct attack on the single most important source of Forex inflows to Nigeria right now.

As we have seen in the UK this week, panic is a natural reaction to uncertainty. Careless & ignorant statements can fuel uncertainty. The last set of people that Nigeria can afford to panic right now are "autonomous sources" whose steadiness is perhaps our saving grace.

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