Banks assure customers, meets with CBN over FX ban; as UBA is readmitted

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Thursday, August 25, 2016 6.18 AM / News round-up

Further to media reports on the suspension of nine commercial banks from accessing the foreign exchange market for failure to remit balances held under the Treasury Single Account (TSA) with the Central Bank of Nigeria, a number of banks have issued a clarification of the situation as follows:


·         While this is a broader banking sector issue arising from the current difficult market conditions, the banks continue to work with its clients and the banking sector regulator, the Central Bank of Nigeria to resolve the situation in the shortest possible time;

·         There is need to correct the erroneous impression created in the media that there was concealment of information on this subject. The banks at all times reported the balances involved to the Central Bank and participated in several bilateral and multilateral discussions with other stakeholders to resolve the matter;

·         Arising from the efforts referenced above, the banks have reduced the sum outstanding considerably in a very short period;

·         The banks have always complied with all regulatory and other operating requirements and the TSA regulation is no exception.

CBN enforces sanctions
The CBN on Wednesday, enforced its ban on all nine banks from participating in the FX market for not remitting a total of $2.334 billion to the TSA due from NNPC/NLNG deposits. The balances for each bank as stated by CBN is as follows:

1.       United Bank for Africa (UBA) Plc – $530 million

2.      First Bank of Nigeria (FBN) Ltd. – $469 million

3.      Diamond Bank Plc – $287 million

4.      Sterling Bank Plc – $269 million

5.      Skye Bank Plc — $221 million

6.      Fidelity Bank Plc – $209 million

7.      Keystone Bank Ltd. – $139 million

8.     First City Monument Bank (FCMB) Ltd. – $125 million

9.      Heritage Bank Limited – $85.5 million.

UBA removed from the list of Nine

The Central Bank of Nigeria (CBN) late Wednesday night deleted the United Bank for Africa (UBA) from the list of nine deposit money banks (DMBs) banned from the foreign exchange market.


According to the Director, Banking Supervision of CBN, ‘Tokunbo Martins, who made the announcement on Wednesday night:

“Further to the directive of the Central Bank of Nigeria (CBN) to all Deposit Money Banks (DMBs) to return all outstanding unremitted NNPC/NLNG foreign currency, this is to confirm that the United Bank for Africa (UBA) Plc has remitted all outstanding NNPC/NLNG deposits in its possession to NNPC’s Treasury Single Account (TSA) at the CBN. Accordingly, the United Bank for Africa (UBA) Plc has been re-admitted into the Foreign Exchange Market effective Thursday, August 25, 2016.”

Impact of ban on Naira
The interbank FX market opened yesterday with no deals, until three minutes before the end of the session, when the central bank intervened with dollar sales.

According to reports by Thisday “The news of the sanction affected the performance of the naira yesterday as it depreciated to N315.93 to the dollar, lower than the $305.50 from the previous day. On the parallel market, the naira also fell to N402 yesterday, compared to the N397 to the dollar from the previous day”.

CBN meets with Bank CEO’s

The CBN, according to sources held a meeting with bank executives yesterday, something most industry analysts believe should have come before the ban.

Issues raised by the banks, we understand, include how the government can offset the obligations with the significant amounts owed the banks in forwards and currency obligations. For example NNPC’s exposures and others with First Bank Plc is in excess of $500million, over and above the $469m deposit demanded for.

Banks assure Customers
The more immediate issue for the banks and indeed the financial services sector will be that of funding trade obligations.

To address concerns related to the ability of the suspended banks to meet customers’ needs and access to foreign currency solutions, individual banks issued press releases to assure customers of their commitment to doing everything possible to reduce or totally eliminate obstacles created by the ban.

The irony in this move by the CBN is that it is coming at a time when all indicators are showing that slowly, offshore investors who stayed away from our market were starting to come back. In the next 48 hours, it will be worthwhile to see how quickly the uncertainty created can be dialed down.

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