The Nigerian government has introduced a nine-month dollar cash deposit program starting October 31, 2024, in its latest attempt to fix the exchange rate & stabilize the naira amid its free fall.
The initiative, announced by Finance Minister Wale Edun after the 144th National Economic Council (NEC) session, will allow Nigerians to deposit dollar notes kept outside the formal banking system without fear of penalties, taxes, or regulations. The move is aimed at increasing the country’s dollar reserves and reducing inflationary pressures caused by high foreign currency demand.
Speaking at a press conference after the NEC, Edun emphasized the government’s laissez-faire attitude towards deposit management, saying “There will be no penalties, no taxes imposed, no questions asked“.
He explained that people who hold cash outside the formal banking system can safely bring it into the financial network by meeting basic Know Your Customer (KYC) requirements without fear of penalties, as long as the money is not linked to criminal activities. The aim, he explained, is to secure these funds and make them available for legitimate economic activities.
Exchange rate: Big Picture problem
The plan reflects a larger pattern of currency reform measures by President Bola Tinubu’s government aimed at strengthening the naira amid the ongoing foreign exchange crisis. The naira’s depreciation trend is believed to be due to a combination of foreign exchange illiquidity and Nigeria’s import dependency with low productivity and limited export base.
Against this backdrop, the government has turned to remittances from the diaspora to boost foreign exchange inflows in the face of declining oil revenues. The central bank recently announced that Nigeria’s foreign exchange reserves had reached $40 billion, but the naira continued to lose value in the foreign exchange market, falling to 1,700 naira per dollar.
Under the program, the Ministry of Finance, alongside the Central Bank of Nigeria (CBN), will soon release comprehensive guidelines to operationalize this initiative. The government hopes that, by attracting dollar bills into the financial system, it can increase dollar reserves, add liquidity, and in turn strengthen the exchange rate while discouraging currency speculation
