Sierra Leone Telegraph: 3 March 2020:
The governor of the Bank of Sierra Leone – Professor Kelfala Kallon yesterday announced a major shake-up of the country’s foreign exchange market, banning the buying and selling of foreign currencies by street vendors and all unlicensed agencies across the country.
Anyone caught violating this ban will from yesterday pay a hefty fine, or sent to jail for three years or more.
Sierra Leone’s currency – the Leone has seen its value plummeted by more than 40% since 2016, as the country’s exports which are largely dominated by the mining industry fell.
Several mining companies are facing huge challenge in the face of declining global demand. Some of the companies have had their mining contracts terminated or suspended by the government, who says that the people of Sierra Leone are not benefiting from the country’s vast natural resources.
Sierra Leone’s over-reliance on the mining industry for export revenue has had detrimental impact on the economy, which successive governments have failed to diversify.
Yesterday’s announcement by the Bank of Sierra Leone to limit the trading of foreign currencies to commercial banks and government approved foreign exchange bureaus, could in the short term ease the pressure on demand for foreign currencies and therefore help the Leone to regain some of its lost value.
There are fears unlicensed foreign exchange vendors may now go underground or hoard their stock of foreign currencies, instead of selling them on to the commercial banks. But experts say that such action could backfire on those hoarding large quantities of foreign currencies, once the value of those currencies starts to fall against the Leone.
It is estimated that unlicensed foreign currency vendors and street traders, account for over 80% of sale of currencies to non-commercial buyers.
Some of these unlicensed vendors are owned by politicians and senior public officials who, it is suspected, will violate the ban with impunity.
But the Bank governor is determined to control the sale of foreign currencies in order to stem the decline of the Leone. In a notice published yesterday, he said “Pursuant to Section 48(3) of the Bank of Sierra Leone Act 2019, the Governor of the Bank of Sierra Leone hereby directs as follows:
- Foreign currency trading (meaning the buying and / or selling of foreign currency) shall be undertaken by only commercial banks and licensed foreign exchange bureaus.
- Commercial banks and licensed foreign exchange bureaus shall engage in foreign currency transactions at only their registered business address on file at the Bank of Sierra Leone.
- Street trading of foreign currency is strictly prohibited with immediate effect.
- Buying foreign currency from, or selling foreign currency to persons or entities that are not commercial banks or licensed foreign exchange bureaus is strictly prohibited.
“Please know that contravening any of the above directives shall constitute a violation of the Bank of Sierra Leone Act 2019. Upon conviction, violators shall be ‘liable for fine of 100 million Leones or an imprisonment for a term not less than 3 years or both’ (Section 26(5).”
One Pound Sterling was sold yesterday by a licensed vendor in Freetown before the passing of this directive for 12,150 Leones.
The expectation now is that by forcing all foreign currency transactions to go through the commercial banks and licenced vendors, the Leone could swiftly appreciate in value to about 10,500 Leones to a Pound by the end of this month, which must be good news for prices of imported goods and inflation.
According to many commentators, this move by the governor of the Bank of Sierra Leone, is the best decision he has made since his appointment by president Bio two years ago.
In little Gambia it is illegal to trade in foreign currency outside the banking system, thereby enabling the authorities to determine which way the local currency is heading vis-a-vis market forces. At any precise moment the authorities can assess what should be done to keep things stable to ensure for example, that imports do not become excessively expensive.
The biggest advantage here is that when the central bank governor of Gambia sees the value of the Gambian plummeting in foreign markets he can use the foreign currency reserves of the country to buy the Dalasi to make it scarce and so increase its value. He does the reverse when the Dalasi appreciates beyond a certain point. Can we all see why the Dalasi May be more stable than the Leone?
Some people have been on tirade about how the new policy would negatively affect employment without reflecting on the fact that in this context allowing foreign currency traders to be in a free-for-all environment is adversely affecting millions. Sierra Leone virtually makes nothing – most of our needs are met by imports. In any case how many foreign currency traders are there compared to the rest of the population who go to bed hungry every blessed day?
Our economy is sick, we should all know that, and whatever medication we can use to avoid slipping into death throes, should be used. It’s a war we cannot afford to lose in the full knowledge that there will be casualties.
Bad Policies always yield bad outcomes. Public policy must benefit the public not those who make it. For me, banning all foreign currency transactions in Sierra Leone is not my issue, my issue is this: how it was done?
First, one needed to learn how many street dealers we have in Sierra Leone especially in Makeni, Bo, Kenema and Freetown. That alone could have helped learn how many people the sector employs. In an economy like Sierra Leone, a policy that takes a job from people is already a bad policy no matter what the intentions are.
For instance, I am working outside Sierra Leone and I receive foreign currency from abroad to my account. Only to realize I cannot get foreign currency out of the bank.
In addition to this scenario, no bank in Sierra Leone (Commercial Banks) respects the Central bank rates published on the website. The government has never taken a step against that. When you visit different banks, they will give you different rates – that is not healthy if the government really seem serious.
What I am suggesting is this:
Conduct an Assessment to know how many people are in the sector
Establish a system for them to register and open offices
And with at, force all currency exchange to strictly respect Central Bank published rates
At the end, all these registered exchange bureaus will pay tax to the government and then government can regulate their actions.
The problem we want to solve is not street selling and buying of foreign notes. It is about the rate. You cannot control the rate if you create a policy that takes the money in circulation out of the banking sector. This is because, such policy takes the money out of the banking sector and black money takes over the market.
The real loser is the government and the poor people. To avoid this, do the right thing. Discuss and negotiate with the sector and standardize it.
“The problem we want to solve is not street selling and buying of foreign notes. It is about the rate. You cannot control the rate if you create a policy that takes the money in circulation out of the banking sector.” M. Sahr Nouwah
If Sierra Leone had wanted to control the exchange rate, wouldn’t it simply have opted for a fixed exchange rate system? With a fixed exchange rate system, the Leone’s exchange rate would be tied to a major currency so that the Leone’s value would be kept within a narrow band. But this was never the intent of the government of Sierra Leone or the Bank of Sierra Leone.
With all its advantages, a fatal disadvantage of a fixed exchange rate regime is that it gives a country and its central bank less scope to implement monetary and fiscal policies to promote economic stability and growth.
The recently implemented Bank of Sierra Leone policy is not meant to control exchange rates but to regulate the process of inflows and outflows of currencies within the foreign exchange market. For sure, this policy would have an influence on exchange rates. However, it would not control or determine exchange rates as the determination of exchange rates would continue to remain in the domain of market forces – supply and demand.
It is important that market forces be left to determine exchange rates as this automatically deals with the balance of payments (BOP) problem. Thus, when the balance of payments is in deficit, the external value of the country’s currency depreciates. This encourages exports while discouraging imports and ultimately brings about the equilibrium of balance of payments.
If folks can obtain a driver’s license to drive in Sierra Leone, I don’t understand why they would be resistant to obtaining a license to buy and sell currencies. Why should an important market like the foreign exchange market remain unregulated? Is it not a core function of the central bank to regulate the money supply in the economy at any given time?
Mr Coleman – You don’t have to remind me of how cold,mean-spirited,and heartless the SLPP can be – I already know.(lol) Neither do you have to wave flags of protests, signalling they are not shockingly incompetent:we know they are.(lol)Now listen,a government by the People,and for the People doesn’t create, and implement poorly advised policies overnight,
that could have devastating effects on the daily livelihoods of struggling families,without first,candidly,addressing the fears,concerns of those involved.
Tell,your armchair,Professors that’s just the simplest,basic principle of sensible, sustainable, credible, and responsible governance. It really is! But then again,why insist Saidu? These guys don’t understand the differences between simple basics,and nerve wrecking complexities;knees,and elbows are one,and the same to them.(lol) You were elected to do the
hard thinking; to use creativity,and ingenuity, to reduce poverty,and not magnify, and intensify it’s abilities to wreck havoc, and reduce lives to rubble…”See ya later, Alligator” Rising Sun Will Rise,above the lies,and shine Again.
Mr. Conteh,
It is preposterous to insinuate that the fight to eradicate poverty in Sierra Leone must be tied to encouraging lawlessness in the country. Moreover, just because the APC was an enabler of lawless behavior in Sierra Leone’s foreign exchange market does not mean that the SLPP should not differentiate itself by clamping down on APC-induced recklessness and lawlessness.
On the same token, I do not understand why a genuine attempt by government to regulate a market that is critical to growth in Sierra Leone can be misconstrued as trampling on the rights of a few men who believe that their rights to lawlessness is sacrosanct. If these folks are so much in love with buying and selling currencies, why not respect the new policy and obtain a license? Is that not how that career is pursued in many other developing countries?
I believe that the faster the SLPP government buries repugnant APC-era policies the better and faster it would allow the government to create a trajectory of development that would be beneficial to all in Sierra Leone.
Mr Bilal Coleman always like to neutralise or water-down any argument that is not SLPP orientated. He is quite correct in some areas of his argument, in this instance, though Saidu Conteh and Young4na came top on this issue of stabilizing or appreciating the local currency.
Young4na hit the nail on the head when he cited the reckless and inconsiderate miscalculation of this government in closing down the mines – the main source of external revenue in the country. There is no other way to this problem. Sierra Leone would have to do business (offer their goods and services) with other countries in order for their currency to appreciate. When other countries buy goods or services directly from Sierra Leone, they would have to buy the Leone (Le) first in order to carry out the transaction. This will increase DEMAND for the local currency and hence improve its value. This is basic International Macroeconomics.
The current strengthening of currency regulations by the Central Bank of Sierra Leone is not a bad move, at all. But unless these measures are fairly and equally policed, then there is the danger of creating a strong underground or black market economy. At extremes, this will constitute to a mafia atmosphere – with all the crime and lawlessness associated with it. Especially, considering the current economic and socio-politcal situation the country finds itself.
By all indications, the ‘Swaizzy boys’ / ‘dollar boys’ dealing in foreign currency exchanges have been in operation since I was a little boy. Regimes have come and gone, with the national economy having its usual ups and downs, yet they have been left alone to carry on with their niche market. Even during the NPRC junta days, these guys were in full operation. So it bemuses me why all of a sudden they have been singled out for eradication simply because the current regime has made some bad decisions in closing down mining companies that were mainly responsible for the influx of foreign currencies.
Yes according to existing financial laws, these guys might be holding on foreign currencies illegally, however, are these citizens the only ones engaging in illegal activities to sustain their livelihoods? As we speak, majority of the public officials in the current regime are hoarding in their homes and possessing 100s of thousands in foreign currencies. One only has to visit the Lumley beach waterfront area and witness how these guys lavish money, all in dollar notes and other foreign currencies. When these guys open their wallets to pay for good and services, all you see is fresh dollar bills. Many of them barely carry around local currencies since a small amount will bulge your pocket.
From face value, the black market boys are committing no crime. They are not going around stealing other people’s monies or valuables to feed their families. In fact, many of them get loans from the local banks and use these to flip around earning a little interest here and there which they use to sustain their livelihoods.
Due to unavailability of banks and foreign currencies outside Freetown, many of the local business people who traverse the subregion (Guinea, Gambia, Ivory coast, Mali, Senegal etc) to acquire goods and services depend on these black market traders for their source of foreign currencies. So I clearly see no rational in bashing these groups of Sierra Leoneans who by all indications play a vital role in our economy.
When I read the responses here, it tells me exactly why Sierra Leone is as it is today.
No one is taking the source of livelihood from anybody. This law about not trading in foreign currency illegally has been there for as long as I remember. However, as a prelude to what was to relegate us to the failed state status, Sierra Leone stopped enforcing all existing law.
Today, this trend has become worse as every law breaker is basing his or her unlawful act to poverty and “my only source of livelihood”. If it is not a person dealing in Foreign exchange illegally despite having built a house from it and can boast of $20000 or more thousand dollars at hand, it would be person having 4 or five power saws illegally cutting the last remaining forest and feigning the poverty mantra as their only livelihood.
But if we continue breaking the law under the guise of poverty, how we as a nation are going to leap out of this perpetual problem?
The banning of street trading in foreign currency does not mean that those engaged in its illegally cannot come together with the little monies they have and register a bureau, thus making their trade legal. When the Fullah’s in Sierra Leone started carving a niche for themselves in the import and export business, I know that we used to come together four or five or some more with our little earnings ranging from 1000 to 10,000 dollars and import a forty feet container. The profits were paltry at the start but as businesses improved and profit tickled in, individually we started earning enough to singly import 20 or 40 feet containers.
These guys at ‘swaizzy’ for example some of them have constructed houses valued over 100,000 Dollars or more and yet we are saying they are poor.
All that the system is asking for is that they should regulate their business, and pay their taxes instead of running a parallel and unregulated business which not under undermine the economy, but it is also a security threat with the growing jihadist and security issues engulfing West Africa.
My advice to the Bank Governor is for him to work closely with the Inspector General of Police to ensure that the law is enforced and that police officers do not see this as another avenue of making extra money by taking bribe and turning a blind eye when they see defaulters.
By the way, what has happened to the Lebanese that was arrested at Lungi sometime last year smuggling out of the country almost 600,000 in different currencies?
Absolutely not! This is not a good move,Mr Kanneh. Nope! You don’t call an ill advised, inconsiderate policy of government that strips citizens of their means of livelihood, without first finding responsible ways of replenishing their lost revenues a good move.
Again,any policy implemented by government that seeks
to destroy the daily substances of citizens trying to survive,and make ends meet is an already failed policy.
The main purpose of any
government is to safeguard the rights,and interests of its people,at all cost…to maintain, and sustain the security,and standards of living of all of its citizens, not to reduce, diminish,and render them worthless. Rising Sun Will Rise Again.
Saidu Conteh,
Exchange rates are a critical determinant of economic performance. It follows that a country that continues to condone lawlessness in its foreign exchange market undermines not only the movement of exchange rates but the overall conduct of monetary and fiscal policies.
The foreign exchange policy announced by the erudite Governor of the Bank of Sierra Leone does not strip any citizen of his or her livelihood as you erroneously argue. The policy dictates that those that want to participate in the foreign exchange market via selling and/or buying currencies should henceforth obtain a license. What the hell is wrong with legalizing such an important activity?
I was in Morocco in December 2019 and could not buy the Moroccan currency in my hotel. I was referred to a foreign exchange bureau. Imposing a foreign exchange control allows the central bank to manage the economy more efficiently. When the inflow and outflow of foreign currency is left unregulated, exchange rate volatility becomes the norm. Thus, a regulated foreign exchange market allows the central bank to be more efficient in reducing exchange rate volatility and by extension – stabilizing the economy.
Those who believe that earning a livelihood must proceed in tandem with engaging in lawlessness have been put on notice. Get a license or you will be arrested, fined and/or locked up. Halting or chipping away at APC-era lawlessness is a critical path to a speedy economic recovery. The Fallen Sun Will Never Rise Again.
It is a good move and hope the Central Bank implements it to the fullest.
Indeed. “the government now or in future must be ruthless in dealing with corrupt individuals”. Remember that, you can’t pretend to fight corruption when you, your very self is corrupt. “Especially”, the SLPP that is now in power. Abee Mr. Jay tee? Na True. Talking to myself. God bless Mr Jay tee for his analysis.
There’s a popular saying; that absence makes the heart grow fonder – very true! Folks, please excuse my absence on this glorious forum due to circumstances beyond my control. In the past two weeks,I have been seriously tied up in knots, shackled, braced and chained with obligations like a raging,fighting,red eyed bull of a brave Fulani herdsman,being gallantly restrained from kicking,and getting totally out of control.(lol) Glad to be back,in the arena of skilled gladiators, warriors, with their swords drawn,who are prepared to protect,and safeguard truth,liberty,and Justice,by any means they see as possible.
Sierra Leone, my only home,is where the notorious SLPP,is still promoting with laughable impunity their trademark, regressive, ineffective, I’ll advised policies,boldly written,and carved on stone,I mean seriously,you don’t need to be able to read minds,to discern that the Criminal IMF is behind the scenes,putting their self-centred structures in place,to keep our naive people subdued forever.Where at the jobs that these good for nothings have so far created,that gave them the audacity to cancel,the steady sources of incomes,revenues and daily means of survival of thousands?
Polluters of streams of progress, and prosperity,they are;unthinking, and unfeeling men who don’t give a damn,at all,about the poor,and suffering masses. My Goodness! Is this how things are supposed to be done,so callously,coldly,and recklessly? I gotta admit,they are experts at pulling the rug under the feet of the marginalised, suffering, struggling masses in our beloved nation. Who wants to bet,that this is another already failed policy?Imposing fines,and punishment on citizens trying to make ends meet has never worked,and will never work.Instead of bringing local vendors under a strategic umbrella of
mutual understanding, and dialogue,they are using tactics of threats,bullying,and fear against vulnerable,ordinary people.
But then again who is surprised? Intimidation,and lawlessly trampling on the rights of citizens, foreigners,and investors is the SLPP way. A hungry man is an angry man;wait and see how quickly Crime and Criminal activities, become an acceptable way of life in Sierra. Leone. And, again,has the icy cold,incompetent SLPP even considered that they will be strengthening the
black market for local vendors,who will then smuggle their money to neighboring Guinea, and Liberia? Geez! In the end,Sierra Leone will lose again,move backwards again, because of the inadequate policies of a Bio government?
How silly are these people? Chasing ghosts in broad day light? Fretting,and running after wild geese that cannot ever be caught;and stupidly putting the cart before the horse that pulls it? They are chasing investors away that could bring truckloads of foreign currency to our nations coffers;and to make matters even worse,they are strangling,and harassing the little guys,making peanuts,just for a miserable, handful of pocket change.(lol) It seems clear to me, Priorities are not in order. Rising Sun Will Rise Again.
While some of us who reside in the Western part of the world do benefit from “street foreign currency trade” when we travel to Sierra Leone, I’m happy that the Government is taking this measure in an effort to help control our currency. However, as many have stated on this forum, the implications are huge.
First of all, this measure has to apply to all. What plans have been put in place for youth employment, technical programs to assist with and create employment opportunities, etc. There are college students who cannot find jobs let alone street vendors. I’m afraid that if appropriate measures are not implemented, this action will only create foreseable problems such as increase in crime. People are suffering in that country. Praying for mama Salone.
People will think this is a good move by the bank governor but guess what, I promise you this will make it worse; and I promise you by the end of the week the pound will be 13000 leones. The reason is simple – those street currency exchange guys don’t have a job. The government has closed all mining companies. How do they expect the people to live.
To me, Government should have given a chance to those mining companies to operate so people can get jobs. Then if the governor put this regulation, it will work. But trust me, by next week you will hear the latest. First of all commercial banks dont even have enough foreign currencies to sell to the business community.
This is a good idea for the banking system to have control. However, such legislation would have a knocking effect on the lives of many young men and their families. Any responsible governor May have thought of that before passing this regulation. First he should prepare these people by calling a meeting to educate them and give them time to look for another source of income.
This regulation is a big deal. It will definitely improve the lack of foreign currency in the banking system. But first, inform the general public. This command and control type of governance is not good for a fragile nation of Sierra Leone.
It sounds like a good deal, if only the law is implemented evenly, regardless of status or influence. We all know and can attest that laws in Sierra Leone don’t affect influential people and their relatives. So let’s wait and see how this ban goes.
I belive the move is good provided the Government can create employment for the youths. They should also ban the use of Dollars in renting houses. Our currency should be used.
An elephant’s head is not a child’s load.
Indeed desperate times call for desperate measures. It appears the business model of our self-employed black market boys will cease to exist henceforth. For several decades and counting, hundreds of citizens depend on this business model to sustain their livelihoods; too bad, this group of citizens’ economic situation will now be kicked in the wilderness for no actions of their own.
Fascinating stuff. Desperate times require desperate measures. Many thanks Mr. Bank Governor and may God bless you.
Dear Editor,
As a follow-up to my earlier response, it is imperative that the government identifies some jobs to gainfully employ those young people (street currency vendors) who definitely may have been affected by the ban. These young people must not be left in the cold, suddenly income less. Presumably, the currency sale wasn’t illegal because it was done in the public view of all, including the very government and public officials.
In order to reduce or prevent sudden rise in crime,may I encourage the labor ministry to urgently develop and implement a short-term and long-term job opportunities now to sustainably engage these affected youths. What has been done is like closing one big hole in the economy and digging up another huge hole in the labor market. Much more proactive attitude is needed in order for the economy to be sustainable and viable.
This is indeed a welcome news for the people of Sierra Leone, potential investors and business owners. This ban, in my opinion is one of the greatest milestones and achievements of the current government. It will surely have a ripple effect on the economy. If countries like Tanzania and Kenya can do the same successfully, I am of the candid opinion that this piece of legislation would succeed. My appeal to the Central Bank Governor is to endeavor to implement this legislation to the letter. Make Sierra Leone great again, please.
Thanks
The two main parties have failed Sierra Leone miserably, especially APC who have governed the longest.Any government must not accept a contract of any nature that is detrimental to the people of Sierra Leone. Upon all the natural resources we have but Sierra Leone is still poor a nation. This is due to mismanagement and systemic corrupt government officials who will not stop at any thing but to immerse themselves in wealth. If Sierra Leone is going to be self sufficient and not reliant on foreign aid aid, the government now or in future must be ruthless in dealing with corrupt indivduals.