Femi Falana, a human rights activist and Senior Advocate of Nigeria (SAN), has filed a lawsuit against the Central Bank of Nigeria (CBN) at the Federal High Court, claiming that the it’s decision to float the naira is unlawful.
On Friday, August 18, 2023, Falana revealed this to newsmen. He claimed that the CBN act required the apex bank to determine the currency rate.
Falana remarked that the decision to let market forces determine the value of the naira is not supported by legislation, despite his insistence that there is no provision for the naira to be floated.
The human rights lawyer said, “There’s no provision for floating the naira. It’s illegal. You say, ‘The value of the naira will be determined by market forces.’ That is not there in the law,” he said.
“I’ve had to sue the Central Bank of Nigeria at the Federal High Court because Section 16 of the Central Bank Act has imposed a duty on the Central Bank to fix and determine the rate of the naira vis-a-vis other currency.”
He noted that Section 20(1) of the CBN Act provides that the only legal tender in Nigeria shall be the currency notes issued by the Central Bank: “only the naira.”
Section 20 (5) of the Act also provides that anybody who spends any other currency in Nigeria without the approval of the central bank has committed an offence “and shall be prosecuted”, he explained, adding, “The penalty is six months’ imprisonment.”
Falana argued further that as long as government officials are not prepared to strengthen the naira and make it the only legal tender in Nigeria, “we’re not going to go far”.
While commenting on the Federal Government’s approval of N5 billion for each state and the Federal Capital Territory (FCT) to enable them to procure food items for distribution to the poor in their respective states, Falana argued that the measures were diversionary.
He said, “They are temporary measures. Some of them are quite diversionary and the people in government have not addressed the root of the crisis, which is the dollarisation of the economy.
“Whatever palliatives that are announced will be eaten up by the dollarisation of the economy.”
On June 14, 2023, the CBN announced the unification of all segments of Nigeria’s foreign exchange market, consolidating all windows into one.
This move was one of several quick adjustments made to increase the liquidity and stability of the Nigerian Foreign Exchange (FX) Market.
In accordance with this decision, commercial banks were permitted to lift the naira’s rate cap at the Foreign Exchange Market’s Investors and Exporters (I&E) window, allowing the naira to freely fluctuate against the dollar and other major world currencies.
The organized private sector, financial professionals, and economists have applauded the CBN’s move to float the currency and converge the nation’s various exchange rates.
They are of the opinion that this action will increase foreign investment and capital inflow into the economy while also bringing transparency and stability to the FX market.
However, some groups including organised labour criticized the policy which they said is not well thought out and has led to a spike in exchange rate with the attendant increase in the cost of goods and services.