Apex bank directs banks to sell at N197/Dollar to hajj pilgrims, despite recession

folarin okunola

August 5, 2016 10:12 AM

To think that a government would prioritize subsidizing religious trips, a personal non-economic journey, at a time when economic growth has slowed to a near standstill is beyond comprehension.

Central Bank Governor Godwin Emefiele speaks on the conclusion of the monthly Monetary Policy Committee meeting in Abuja, Nigeria.

The Central Bank of Nigeria (CBN), on Thursday, ordered all banks and authorized forex dealers to sell the Pilgrims Travelling Allowance (PTA) to intending pilgrims at a concessionary exchange rate of N197 to $1.

Why this decision is being taken, at a time when the Naira is at all-time lows and the economy is in an unprecedented economic recession, is as mind-boggling as anything I've ever heard.

In a circular sent across on Thursday, marked TED/FEMFPC/GEN/01/005, the CBN stated: “Each pilgrim is entitled to purchase a minimum of $750.00 and maximum of US$1,000.00 as PTA. The Federal Government has approved that intending pilgrims are to be sold the PTA at a concessionary exchange rate of N197.00 to the US dollar.

“No commission shall be charged by the banks for the sale of the PTA to the intending pilgrims. The Central Bank of Nigeria shall sale the PTA to the designated banks in Lagos and Abuja and the accounts of the respective banks shall be debited as soon as the funds are disbursed….”

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There have been outcries on why this is a bad idea and some radio personalities even referred to the CBN order as "misplaced priorities". Why is the government subsidizing religious trips when the country, quite simply, cannot afford it?

Just yesterday, after the CBN stopped remittances from all but three money transfer operators, the Naira hit N400/Dollar on the parallel forex market, something analysts had predicted a few weeks ago. Last month, inflation also climbed to 16% while international oil prices have continued to drop and the budget, which took forever to pass, is even at a worse deficit than when it was passed.

To think that a government would prioritize subsidizing religious trips, a personal non-economic journey, at a time when economic growth has slowed to a near standstill is beyond comprehension. Even in countries that more Islamic than Nigeria, such as Saudi Arabia, Turkey, and Pakistan, the government doesn't sponsor nor subsidize Hajj trips.

The extent to which this could be detrimental to the Nigerian economy cannot be over emphasized. Inflation will continue, wasteful government spending will persist, diversification of the economy will stagnate and the country will continue its downward spiral.

In the past, the CBN and its management have put very damaging policies in place but this? This is a step shy of utter madness.

folarin okunola