• Wednesday, June 12, 2024
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BusinessDay

From Nigeria to Harare, African nations are cracking down on street currency dealers as currencies struggle

Egypt learns how not to float a currency from Nigeria’s mistakes

Out of options to defend their currencies, African policymakers from Harare in the south to Juba in the east and Lagos in the west are cracking down on street dealers.

Monetary authorities in Zambia, Zimbabwe, Nigeria and South Sudan are throwing everything at the money changers, who they accuse of undermining their currencies by speculating. They’ve banned and arrested them, imposed hefty fines and revised existing operational guidelines for bureaux de changes.

All four countries have thriving parallel markets whose exchange rates are far more utilized than the official rates set by the central banks.

Ghana has now joined the fray and imposed new rules on street dealers. Governor Ernest Addison on Monday ordered foreign-exchange bureaus to stop advertising rates outside their premises and on social media and said the central bank had set up a task force to ensure compliance.

“The bank is fully aware of the operations of illegal operators in the foreign-exchange market and is working with the financial intelligence center to sanitize the market,” he said at briefing in the capital, Accra.
Most of the nations say their moves are aimed at formalizing the foreign-exchange market.
“You can’t just wake up one morning and start dealing in a regulated service,” Governor Denny Kalyalya, of Zambia, said earlier this month.

Foreign investors are often discouraged from investing in nations with parallel markets because of the impact they can have on the stability of a currency, said Charles Robertson, the head of macro-strategy at FIM Partners.

The Bank of South Sudan’s Governor James Alic Garang said Thursday they had seen some “partial success” from the measures rolled out in April under a so-called “foreign-exchange market reorganization strategy” targeting the street dealers.

“Some of those people who were selling on the street, many of them have begun to come to the bank,” Garang said in an interview on the sidelines of the African Development Bank annual meetings in Nairobi, Kenya.