As the leone continues its free fall against major currencies such as Pounds Sterling and Dollars, The Bank of Sierra Leone is taking drastic measures to counter what they believe may become a hopeless case by banning the sale and buying of foreign currencies from street vendors. This, the authorities believe will help save the Leone from further depreciation. According to the governor of the Bank of Sierra Leone Professor Kelfala Kallon who announced a major shake-up of the country’s foreign exchange market, anyone caught violating this ban will 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.
The present government has not been able to deliver much on the economic front since coming to power three years ago. They promised to cut inflation but the opposite has been the case. They also promised to stem the tide on the depreciation of the currency but instead the leone has lost its value by 100%, moreso, poverty has increased. 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.
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This 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. But 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.
Speaking on the new regulation 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.
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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).”
Presently One Pound Sterling goes 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.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry