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Central Bank of Nigeria Foreign Exchange Transactions Restriction on Firstbank

Forex
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Thursday, August 25, 2016 3:22pm /FBN Holdings Plc/ Press Release

As you are aware, there have been a number of media reports referencing the temporary suspension of FirstBank from the Nigerian foreign exchange market on account of failure to comply with the Treasury Single Account (TSA) policy. FirstBank wishes to confirm, that it has been and remain in compliance with all tenets of the TSA policy.  The Bank also wishes to state categorically that there has been full disclosure to the CBN and other regulatory authorities at all times.

FirstBank has been a long standing banker to the Nigerian National Petroleum Corporation (NNPC) and its subsidiaries and has over time held balances on their behalf, as well as extended credit facilities to their various entities and other agencies of Government. All these balances have been duly disclosed to the regulatory authorities at all times and more so with the advent of the TSA, which requires commercial banks to remit funds collected, to accounts of the relevant parastatal held in the CBN.

FirstBank holds various domiciliary accounts of the NNPC and its subsidiaries, which have been operated in line with regulatory rules. At various times the NNPC has instructed the Bank to transfer its funds to its accounts held with other banks and the CBN, which FirstBank has always complied with, irrespective of the sums involved. The pool of domiciliary balances the Bank holds have been used to finance short term trade finance obligations, with longer term lending typically funded via institutional borrowings and longer term debt financing.

Given the prevailing foreign exchange regime over the last 16 months, and prior to the flexible exchange rate regime, the Bank engaged its significant funds providers to ensure stability of foreign currency funding for existing trade finance business.  This was a proactive measure, to avert the inability of corporate customers to source foreign exchange from the market, to cover their trade obligations. As correspondent banks retreated from Nigeria on account of the dwindling macroeconomic environment, it became necessary for banks like FirstBank, to settle the maturing trade obligations of customers.

The Bank has been in constant engagement with the NNPC and its large funds providers to maintain balances in the Bank, to continue providing funding for customers’ trade obligations. In this manner, domestic foreign currency balances remained available to finance trade obligations, where most foreign banks were unwilling to do so.

This tripartite engagement has been ongoing in a transparent and properly documented manner, between the Bank, the CBN and the NNPC, in anticipation of a smooth logical conclusion. This fact is in discordance, with allegation of concealment or unwillingness to remit funds, as has been construed by media reports.

It is also pertinent to note, that the Bank is a significant financier to Government and its various ministries, departments and agencies. The Bank is in advanced negotiations with the CBN and the NNPC to settle these obligations immediately, by setting-off the obligations of the Bank and Government.  We are positive of an amicable speedy resolution of the matter, and do not envisage disruptions to usual foreign exchange business.

FirstBank’s business fundamentals remain strong.  With the advent of the flexible exchange rate policy, the Bank has begun to see tentative signs of normalcy returning to the foreign exchange market, which should improve liquidity levels and hence corporate customers’ ability to purchase foreign currency and liquidate their trade obligations to banks in Nigeria, including FirstBank.

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