BEVERLY HILLS, AUGUST 23, (THEWILL) – The Central Bank of Nigeria (CBN) has barred nine banks operating in Nigeria from all foreign exchange transactions for failing to remit over $2 billion dollars belonging to the Nigerian National Petroleum Corporation (NNPC), to the Single Treasury Account (TSA) domiciled at the CBN as directed by the Presidency in 2015.
CBN sources listed the infringing banks as United Bank for Africa (UBA) $530m; 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).
Sources at the apex bank which confirmed the development, which was first reported by ThisDay, said the bank under Governor Godwin Emefiele would continue to sanction commercial to ensure that they comply with regulations.
The nine banks would remain suspended from forex transactions until they transfer the funds to the TSA account. CBN sources told THEWILL that further sanctions would be handed the banks in due course.
But UBA in a statement later on Tuesday said it had remitted all dollars held on behalf of NNPC/NLNG into the TSA. “We wish to state very categorically that UBA has completely remitted all NNPC/NLNG dollar deposits,” Charles Aigbe, the bank’s spokesman said in a emailed statement to THEWILL.
The suspension comes after the CBN tightened restrictions on the flow of dollars to domestic lenders in March. That has forced the banks to delay hard-currency loan and trade repayments and increased their risk of default.
“This is really a function of the dire macroeconomic situation and illiquidity in the FX markets rather than willful non-compliance by banks,” Diran Olojo, a spokesman for FCMB, one of the banks affected, told Reuters.
Olojo said the bank was working with the central bank to resolve the issue.
The banks have failed to remit $2.1 billion, the government’s share of dividends from the state-owned gas company, NLNG.
The banks were supposed to pay the money into the government’s account at the central bank.
Last year, President Muhammadu Buhari ordered the merger of state accounts into that one account at the central bank to reduce corruption.
“We could not trade today,” one banker said. “The suspension is meant to pass on the pressure to banks to make payments (but) this is foreign currency and we have to source the dollars.”
Nigeria is suffering its worst financial crisis in decades as a slump in oil revenues hammers public finances and the naira. The central bank governor has said recession is likely.
The bank floated the currency in June to attract investment, allowing the naira to fall by 40 percent against the dollar. But foreign investors have remained on the sidelines, making the central bank the main supplier of dollars.
Some lenders were trying to sell assets to pay the funds, another banker said, adding that the central bank was aware of refinancing challenges facing the industry.
A director at one of the affected lenders said his bank informed all board members of the suspension via a letter on Tuesday, adding it held $125 million of the total sum.
The central bank has been selling dollars almost daily to boost interbank trading and liquidity. But it reduced its sales volume this week, traders said, after it settled two-month outright forwards it sold in June.
The regulator paid $1.2 billion for currency forwards it sold in June at 280 per dollar, the bankers said, further draining its dollar reserves. Those reserves are down to $25.7 billion, their lowest in more than 11 years.
The naira, which hit a record low of 365.25 per dollar on Thursday, closed flat at 305.50 on Tuesday, gaining ground after the central bank sold dollars.
