The Central Bank of Nigeria (CBN) on Tuesday banned nine deposit money banks (DMBs) from the foreign exchange market, for withholding more than $2 billion belonging to the Nigerian National Petroleum Corporation (NNPC) from the Treasury Single Account (TSA).
The banks are: First Bank of Nigeria (FBN)- $469m; Diamond Bank Plc-$287m; Sterling Bank Plc-$269m; Sky Bank Plc -$221m; Fidelity Bank -$209m; Keystone Bank- $139; First City Monument Bank (FCMB) -$125m; and Heritage Bank-$85m.
According to the apex bank authorities, President Muhammadu Buhari has been briefed on the breach by the banks, and the banks have all been mandated to move the monies to the TSA before any consideration for their re-entry into forex trading.
The banks were first accused of round tripping by CBN on Monday. The apex bank had then said it would punish them for doing so.
In a circular addressed to authorised dealers titled: Re: Transactions in ‘Free Funds’ by Authorised Dealers’, signed by its Acting Director, Trade & Exchange, W.D. Gotring, the apex bank accused banks of buying and selling forex without following stipulated guidelines.
“The CBN has noticed that some Authorised Dealers have continued to buy and sell foreign exchange referred to as ‘free funds’ despite the provision of the circular of March 4, 2004 on the subject,” he said and cautioned the lenders that their action was a breach of extant regulations.
“Against the background, authorised dealers are to note that dealing in foreign exchange without appropriate documentation, which includes relevant entries, blotters, physical documents and non-disclosure to the Regulatory Authorities is a breach of extant regulations”.
He stressed that as provided for in the laws and regulations governing dealings in foreign exchange, authorised dealers shall not sell foreign exchange without appropriate documentation and disclosure to the regulatory authorities, irrespective of the source of the funds.
“Accordingly, authorised dealers shall deal in eligible transactions only, and not engage in any foreign exchange transactions on terms inconsistent with the extant laws and or regulations,” he said.
The banks, further findings showed, are engaging in round tripping, taking advantage of the huge forex gaps between the official and the parallel markets.
In a swift reaction, United Bank Fro Africa (UBA) denied hoarding NNPC funds.
Head, Corporate Communications, for the bank, Charles Aigbe said in a statement released after CBN announcement that UBA had submitted all the funds as requested by law.
Aigbe said: “Our attention has been drawn to report of the ban of UBA from the foreign exchange market by the CBN over the non-remittance of NNPC/NLNG dollar deposits.
“We wish to state very categorically that UBA has completely remitted all NNPC/NLNG dollar deposits.
“We thank all our numerous customers, business partners and other stakeholders who have reached out to us on account of this report.”
Also, Spokesperson for FCMB, Mr. Diran Olojo, in a terse statement, said, “We are working with the CBN on an amicable resolution. This is really a function of the dire macroeconomic situation and illiquidity in the FX markets, rather than concealment or willful non-compliance by banks.”