Read in a vacuum, it is possible to conclude that the highlighted proviso as contained in section 20(5) of the CBN Act empowers the CBN without limitation to make prescriptions on or (as it appears to have done) proscribe the use of currencies other than the Naira as means of exchange in Nigeria. However, if the proviso is read within the specific context of the penalty section to which it is appended and if also account is taken of the true meaning of the concept of legal tender, the proper conclusion should be different. As the courts in Nigeria and England have decided consistently in a long line of cases, “as a general rule, a proviso is of necessity limited in its operation to the ambit of the section which it qualifies …. The object of a proviso is normally to cut down or qualify what has been stated before in a section. A proviso does not set out to allocate powers or jurisdiction …. Its function is to create exceptions or relax limitation in a defined sense, or to throw light on any ambiguous import in an enactment….” (NDIC v Federal Mortgage Bank of Nigeria [1997] 2 NWLR 735 at 755 per Uwaifo JCA. See also Lloyds & Scottish Finance Limited v. Modern Cars & Caravans [Kingston] Limited [1964] 2 All ER 732 at 740 and Re Tabrisky ex parte Board of Trade [1947] 2 All ER 182 at 183 -184)
As already stated, the fact of the Naira being stipulated by law as legal tender does not amount to the exclusion of the voluntary adoption of other media of exchange between contracting or trading parties. Indeed, parties may well decide to exchange goods and services for non-monetary considerations without offending the provisions of the CBN Act relating to the Naira as legal tender. It would therefore have been totally unnecessary for the lawmaker to, in introducing the penalty for refusal to accept the legal tender, go to the trouble of creating a proviso that would have the effect of empowering the CBN to grant the public a right that the public always had and that had not been taken away by the CBN Act in the first place or any other law for that matter.
Hence if the proviso is read within its proper context, it can only reasonably mean that the CBN is by that section empowered to specify certain circumstances under which currencies other than the Naira may be used as a medium of exchange in Nigeria in a manner akin to the legal tender – so that if a party were to refuse to accept the Naira in such prescribed circumstance, that party would not have acted in contravention of clause 20(5) of the CBN Act. In other words, the proviso only empowers the CBN to specify exceptions or circumstances under which the refusal to accept the Naira as a means of payment in Nigeria would not constitute an offence under the CBN Act. So for example, the CBN could on the basis of this proviso specify that United States dollars or, if you like, Russian rubles may be used as a medium of exchange in the Nigerian bond market, and that way any broker or dealer in that market would be at liberty to refuse to accept Naira in exchange for bonds without risking the penalty for such refusal under the CBN Act. Any attempt by the CBN or anyone else to read more into the proviso would be patently wrong.
Now one would have thought that it was sufficient for the CBN to, as it had done for several years now, simply continue to make the official foreign exchange market inaccessible for the settlement of foreign currency obligations between local parties. Going as far as it now has to purport to prevent everyone in Nigeria from freely agreeing to settle local debts with foreign currency that is properly obtained from sources outside the official foreign exchange market is rather extreme. Asking banks to get into the business of policing the currency in which people transact business, or to re-write the payment terms in their customers’ contracts, or to desist from collecting or paying out foreign currencies on behalf of their customers for local transactions is even more extreme and downright draconian.
Quite apart from the legal objections to the CBN’s recent actions on this subject, there appear to be other sound reasons for the CBN to rethink its position. As the International Monetary Fund concluded in a recent study on dollarisation in sub-Saharan Africa, “administrative measures aimed at forcing de-dollarization can easily backfire and could encourage capital flight and reduce financial sector intermediation, ultimately hindering growth” (Mauro Mecagni et al, Dollarization in Sub-Saharan Africa: Experience and Lessons, p. 42. [Washington, D.C.: International Monetary Fund, 2015]). “An effective de-dollarization strategy requires a mix of sound macroeconomic policies, microprudential measures, and sustained efforts to create the conditions for longer-term domestic capital market development. Measures that provide market-based incentives are most successful.” The CBN would do well to pay heed.
Chike Obianwu
