The Somali Central Bank has ordered the immediate closure of bank accounts held by companies trading in the forex market. The move could be a...Dec 26th · 2 min read
The Somali Central Bank has ordered the immediate closure of bank accounts held by companies trading in the forex market. The move could be a huge setback to the flourishing forex business in the country.
The Somali government gave a reason for this decision, insisting that it wants to save the downslide of the Somali economy. With the news, those affected are all forex trading companies who have accounts with the commercial banks in the country.
Somali’s Central Bank had already issued the closure order two months ago. The order and decision was a result of the outcome of a meeting with the heads of all commercial banks in the country.
Banks also to submit names of account holders
The directive also includes the submission of the names of all the FX companies that have accounts with the commercial banks in the country. The banks were also asked to provide the account details, including account balance, of each of these forex trading companies. This particular directive caught the attention of the forex trading companies.
The forex trading business in Somalia has been thriving, as a lot of trading companies have opened offices in the country. However, most of the fx businesses in the country are carried out through brokerage. Here, the individual gives the forex company a certain amount of money. The company trades on the individual’s behalf and sends a certain amount of return at the end of the month.Financial reforms hitting investors hard
There have been recent financial reforms by the Somali government to reposition the country’s financial position. Abdirahman Mohamed was appointed by the Bank last year to head the Central Bank operations. Initially, people thought the government wants to appoint a foreigner for that position.
Before he was appointed, he worked with the Prime Minister for two years as the senior economic policy adviser. His appointment was in order since he has a strong background in banking and finance.
Abdirahman has been playing key roles in these reforms wince he was appointed as the Head of the Central Bank. The Central Bank is trying to reduce the $4.8 billion debt that has been affecting the economy amidst political turmoil. And as the country is still struggling with several years of political unrest, the government is seeking debt relief from the international community.
Although the country has been struggling economically, it seems some forex trading companies are raking big from the seemingly booming forex section of the economy. But with the order, that market would create a big setback for those traders.
Forex trading a booming business in Africa
Forex trading has become a huge business for many African countries. South Africa and Nigeria are the two largest markets for forex trading in Africa. However, there is a rapid growth in the business from other African countries too. Somalia is one of the countries currently experiencing a boom in the sector, despite the county’s poor economic situation.
The Somali government thinks the activities of the fx companies is affecting its economy. As recently as October this year, Somali security operatives clamped down on forex companies in Mogadishu, closing down the offices of some of the big companies.
Despite these actions, traders are still taking the risk of investing their money on fx trading. Most of these traders use fx companies that operate using a foreign platform. Currently, Somalia does not have any regulatory framework for online FX trading companies.