Lagos (INVESTADVOCATE)-The Central Bank of Nigeria (CBN) has suspended First Bank of Nigeria Limited, First City Monument Bank, Sterling Bank Plc and six (6) other banks from the interbank currency market for failing to remit money owed to the government, according to a Reuters report quoting banking sources on Tuesday.
Other banks suspended include Skye Bank Plc, Fidelity Bank Plc, Diamond Bank Plc, Heritage Bank Limited, Keystone Bank Limited and United Bank for Africa Plc.
According to the report, 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,” Reuters quoted Diran Olojo, a spokesman for FCMB one of the suspended banks.
He said FCMB was working with the apex bank to resolve the issue.
The report disclosed the lenders 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.” the Reuters report quoted a banker.
The CBN floated the currency in June to attract investment, allowing the naira to fall by 40 percent compared to the dollar. But foreign investors have remained on the sidelines, making the central bank the main supplier of dollars.
According to the report quoting another banker, some lenders were trying to sell assets to pay the funds, “the central bank was aware of refinancing challenges facing the industry,” the source added.
It further disclosed that a director at one of the affected banks said his bank informed all board members of the suspension via a letter on Tuesday, adding it held $125 million of the total sum.
Nigeria’s central bank has been selling dollars almost daily to boost interbank trading and liquidity. But it reduced its sales volume this week, after it settled two-month outright forwards it sold in June, traders said,
The CBN paid $1.2 billion for currency forwards it sold in June at N280 per dollar, the apex bank said, further draining its dollar reserves. Those reserves are down to $25.7 billion, their lowest in more than 11 years.
However, as at the time of filing in this report, UBA in statement said it has remitted into the Single Treasury Account (TSA) domiciled at the CBN all dollar deposits belonging to the Nigerian national Petroleum Corporation (NNPC)/Nigerian Liquefied Natural Gas Company (NLNG).
The naira on Tuesday in the interbank market – had appreciated against all the three currencies, according to Cordros report. It said the local currency appreciated by 1.15 percent to the dollar, 1.43 percent to the pounds sterling and 4.35 percent to the euro to trade at N305.18, N415.26 and N356.74 respectively.
In the parallel market, the naira declined 0.25 percent to the dollar, 0.39 percent to British pounds and 0.68 percent to euro to trade at N397.00, N512.00 and N445.00 respectively.