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.