Sorry CBN, the goats cannot guard the yams
Insanity is banning the sale of FX to BDC's twice without solving the real problems
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I was having lunch at the office the Wednesday Godwin Emefiele, a.k.a Goddy bobo was on Channels TV announcing that the CBN would no longer sell FX to Bureau De Change Operators. After the announcement, Twitter was divided; a few people thought it was a good move while others were hopeful that it would mean $1 = N400. To those people, this is all I have to say:
The CBN’s thinking was that when it stopped selling $$ to Bureau De Change Operators and let banks take over, the FX rates would stabilise. It was brilliant thinking in the same way Buhari’s border closure policy was clever. Also, the current FX strategy is even more comical when you consider that the CBN has used this policy before with disastrous consequences.
When the BDC freeze started a few weeks ago, Bisrmack Rewane said: “The interim solution of substituting BDCs with banks is hardly going to achieve much. You are virtually handing over the yam barns to goats to secure. In the end, there will be no yams nor goats.”
Here’s what Rewane meant:
As long as there are banned items that people cannot get $$ for, the parallel market, a.k.a black market will always be needed.
Because many people who need $$ can’t get it through the official routes, they turn to the BDCs and make them offers they can’t refuse, raising the prices in the process.
No matter what the CBN tells you, it doesn’t have enough $$ to meet legitimate demand; Unilever recently said it had to get FX above market prices
Making the banks sole custodians of FX sales gives them the incentive to sell to BDC operators. That way, everyone except the customer makes more money.
The CBN has done incentivised people and BDC operators to lie to the banks to get $$
At first, the CBN seemed to be winning. The Naira gained against the dollar on the parallel market for the first four days after the policy announcement. But all those gains have been reversed and the CBN is back where it was in 2016.
Goddy Bobo is learning that bans are like telling a hyperactive toddler to sit still while you go down the road to buy something. It will work for a few minutes when your back is turned, but eventually, that kid’s gonna get up and play.
Banks are now asking customers to return “unused FX”
So here’s what’s been happening in the FX market in the last few weeks:
People are booking flight tickets, claiming $$ for Personal Travel Allowances (PTA) and Business Travel Allowances (BTA), and canceling those tickets immediately they get $$.
Some other people are using fake documentation to get $$ from the banks.
Now the CBN wants those people who have taken those $$ from the banks to return it. There are rumours of EFCC action as well.
Now the CBN wants everyone who got PTA and BTA to submit the stamped data page of their passport to figure out if they have valid visas.
TL;DR: Under the watchful eyes of the goats, some yams have been taken out of the barns, roasted to crispy perfection and eaten with palm oil. Now the CBN wants those who have eaten and digested the yams to return them whole or they’ll call police. As the kids say nowadays, CBN “will sleep there.”
Since we’re on the subject of losing battles….
Nigeria and MultiChoice resume a familiar but hostile dance
Last month, I wrote about Nigeria’s relationship with the pay-TV company, MultiChoice:
“MultiChoice is the company Nigerians love to hate. While it is one of Africa’s largest Pay-TV providers and the primary choice of the Nigerian middle-class, there’s no love lost for MultiChoice. Most of that bad blood comes from a long history of Nigerians feeling like they pay too much for DStv subscriptions.”
Here are the key points in the Nigeria vs MultiChoice fight:
In July 2021, Nigeria’s tax authority accused MultiChoice of owing ₦1.8 Trillion ($4.3 billion) in back taxes — that’s more than the company made in Africa in 2020 ($3.4 billion).
The tax authority froze the MultiChoice’s accounts, although it claims the action was so it could audit the company’s accounts.
MultiChoice appealed the allegation, and this week, publications like the Vanguard reported that the Tax Appeal Tribunal ordered the pay-TV company to pay ₦900bn.
But MultiChoice has denied those reports claiming it will have to pay ₦900 billion to the tax appeal tribunal. The company said in a statement:
"The direction issued by the TAT in accordance with paragraph 15(7) of the Fifth Schedule to the FIRS Establishment Act requires Multichoice Nigeria to deposit with FIRS an amount equal to the tax paid by Multichoice Nigeria in the preceding year of assessment or one half of the disputed tax assessment under appeal, whichever is the lesser amount plus 10%. The lesser amount is the tax paid by Multichoice Nigeria in the previous assessed year which is substantially less than the disputed assessment."
Why does this feel so familiar? In September 2018, MTN Nigeria was accused of owing $2.2 billion in back taxes two years after paying $1bn to settle a dispute with Nigeria’s telecoms regulator. At the time, Nigeria’s Attorney-General said the tax debt was determined after a “high-level calculation” and dragged MTN to court.
But MTN denied the accusation and called the AG’s actions illegal. Eventually, Nigeria withdrew the case. Here’s how one analyst described the Federal Government’s actions at the time, and it feels eerily similar to the MultiChoice situation:
"The government of Nigeria is in dire need of cash from a budget perspective and MTN presents a good target because it's a big company and it has flouted regulations before." - Dobek Pater of consultancy house Africa Analysis.
While we’re still on the subject of money and budgets, OPay raised $400 million in funding and was valued at $2 billion. It immediately set off familiar arguments, “is OPay an African company?" “how is OPay valued more than the Orange Bank?” and such. I sorta answered some of these questions when Kuda Bank raised money a few weeks ago, so there’s no need to rehash that.
Instead, it seems worth mentioning that Osagie Alonge, the Director of Marketing at OPay announced his exit the day after the raise. Olumide Akinsola, head of marketing and customer acquisition at SafeBoda, has left the company. Where are they headed next? Although people always say after these exits that they’re taking out time to “rest,” we know they’ll announce their new moves in 15 business days. We wait.
That said, I read so much good stuff this week that the next section will be a lot longer, but before that, please take some time to tell me in the comments how you think the newsletter has done this month. Please tell me what worked, what didn’t, and stuff you’re still undecided about.
What else I’m reading:
This is an old article I stumbled on while looking for publications to pitch a profile I recently wrote to. It’s so so good: Inside the Athletic: the start-up that changed journalism forever
In countries that have better problems than ours, people and businesses aren’t taking loans because they’re flush with cash and according to the NY Times, Banks Are Bingeing on Bonds, but Not Because They Want To
According to this report, Microfinance banks in Nigeria are making good money by charging UK-bound Nigerians for providing proof of funds, it sounds illegal as hell, but hey, this is Nigeria.
I never miss the chance to fame ex-colleagues, especially when they write these kinds of stories that reel you in slowly so you can’t drop your phone until you’re done reading. Read Kay Ugwuede’s “Come Out and Play” here.
Come back! Don’t leave yet…. I’ve got one last request
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What am I doing this Friday you ask? Holing up at home again, watching the King of Boys miniseries - I watched a few episodes at work (don’t report me o!) and it looked pretty nice. I’m on an alcohol break so make sure to drink a beer or three for me. See you on Sunday and write me if you feel up to it - Olumuyiwa@notadeepdive.com