A Critical Analysis of the Effects of the Central Bank of Nigeria Foreign Exchange Policy on Financial Inclusion, Anti-Money Laundering Measures and Fundamental Rights

Abstract

PURPOSE – Following the drop in crude oil prices from a peak of $114 per barrel in July 2014 to as low as $33 per barrel in January 2016, the country’s reserves have suffered great pressure from speculative attacks, round tripping and front loading activities by actors in the foreign exchange market.

The fall in oil prices also implied that the Central Bank of Nigeria (CBN)’s monthly foreign earnings had fallen from as high as $3.2 billion to current levels of as low as $1 billion.

The net effect of these combined forces unfortunately is the depletion of the nation’s foreign exchange reserves. As of June 2014, the stock of foreign exchange reserves stood at about $37.3 billion but has declined to around $28.0 billion as of today.

In order to avoid further depletion of reserves, the CBN adopted a number of policies including the prioritisation of the most critical needs for foreign exchange.

This paper critically analyses the effects of these policies on financial inclusion, anti-money laundering (AML) measures and human rights. Its aim is to determine if CBN’s Forex Policy does strike a fair balance between financial stability, inclusion, AML Measures and human rights.

DESIGN/METHODOLOGY/APPROACH – This paper relies mainly on primary and secondary data drawn from the public domain. It also relies on documentary research.

FINDINGS – This paper determined that the CBN forex policy does not strike a fair balance between financial stability, inclusion, AML Measures and human rights.

RESEARCH LIMITATIONS – This paper focuses on the effect of the most recent CBN Forex Policies on Financial Inclusion, Anti-Money Laundering Measures and Human Rights. It does not address the older policies. Also, it does not address other vulnerable groups like low income households. Its focus is on the under-served group.

ORIGINALITY/VALUE – While many have written articles on CBN’s forex policies, none of those articles critically analyzed the effects of these policies on financial inclusion, AML and fundamental rights.

The Lagos Chamber of Commerce and Industry [LCCI], for example, analysed the impact of these polices on the Financial Services Sector, Manufacturing Sector, Food and household products, Tyre & Rubber Industry, Pharmaceutical Sector, Oil & Gas Sector, Free Trade Zone Sector, Furniture Manufacturers and Foam Manufacturers. It made no mention of inclusion, money laundering and fundamental rights.

Also, Vincent Haruna, analysed the effect of these policies on Nigerians, particularly those engaged in international trade, and those who have children studying abroad. He did not specifically address financial inclusion nor did he make any mention of human rights and money laundering.

Keywords: CBN Forex Policy, Financial Inclusion, Money Laundering, Fundamental Rights