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CBN suspends nine banks from Forex Transactions

by Business News Report


***Diamond, Skye Bank, First Bank, Keystone, others fingered

The Central Bank of Nigeria CBN, yesterday suspended nine banks from further dealing in foreign exchange transactions, until they remit all outstanding NNPC funds in their vaults into the Treasury Single Account TSA. The nine banks were barred for concealing the sum of $2.12 billion belonging to the Nigerian National Petroleum Corporation, NNPC, and failed to remit the funds into the Treasury Single Account as directed by the federal government.

The action of the apex bank however, is seen in some quarters as contradicting an earlier circular on the issue exempting NNPC from TSA. The circular addressed to the Director, Banking and Payments System Department of the CBN, with FD/LP2015/C/ADC/20/1/ /DF as reference number was dated September 14 2015. It was signed by M K Dikwa, for the Accountant-General of the Federation, Federal Ministry of Finance, Funds Department, Abuja, FCT.

The banks, which suspension would remain in force until they remit all the funds to the TSA are United Bank for Africa (UBA) $530m; First Bank of Nigeria (FBN) $469m; Diamond Bank Plc ($287m); Sterling Bank Plc ($269m); Skye Bank Plc ($221m); Fidelity Bank ($209m); Keystone Bank ($139); and Heritage Bank ($85m).The CBN officials said that further disciplinary actions awaited the erring banks after remitting the funds in full to the government’s coffers.

Vanguard gathered that CBN governor was in Lagos yesterday to hold meetings with banks’ Managing Directors to brief them of the development. It was further learned that at the meeting, issues were raised concerning some of the banks that were not listed but it was later learned that further investigations on their transactions is to be carried out.

It was also leaned that President Muhammadu Buhari had been briefed on the matter before the sanctions being imposed on the defaulting banks was arrived at.

The nine banks comprise three old generation banks and another six new generation banks. All the banks remain barred from foreign exchange operations until they fully remit the NNPC funds into government coffers via the Treasury Single Account, the apex bank said.

The Treasury Single Account of the government was established in August 2015, with the government saying it would help check leakages in the system.

The apex bank’s decision to bar the banks comes two months after it released the highlights of the much awaited flexible foreign exchange market policy.

The highlights, which are key notes and agreements reached by the Central Bank of Nigeria, CBN, were released on Wednesday; weeks after the Monetary Policy Committee announced the introduction of the policy. After its meeting of May 24, the CBN said the policy would allow the bank retain a small portion of foreign exchange for critical transactions.

Determined not to tolerate any further breach of extant financial regulations, the Central Bank of Nigeria, CBN, barred the affected from all foreign exchange transactions.

The banks were barred for failing to remit the Nigerian National Petroleum Corporation, NNPC, dollar funds to the federal government’s Treasury Single Account domiciled in the CBN as directed by the Presidency last year.

Speaking on the issue some of the banks officials said that the understanding was that NNPC was exempted from the TSA. They said that the Federal Government had exempted 13 government agencies from the Treasury Single Account (TSA) arrangement related to electronic or e-collection and mop up exercise of government funds from commercial banks. A circular exempting the agencies was communicated to Central Bank of Nigeria (CBN) from the Office of the Accountant-General of the Federation (OAGF). The exempted agencies of government are “profit oriented government business entities that pay dividends to the Federal Government of Nigeria.”

The circular addressed to the Director, Banking and Payments System Department of the CBN, with FD/LP2015/C/ADC/20/1/ /DF as reference number was dated September 14 2015. It was signed by M K Dikwa, for the Accountant-General of the Federation, Federal Ministry of Finance, Funds Department, Abuja, FCT.

The exempted agencies are: Nigeria National Petroleum Corporation (NNPC), Power Holding Company of Nigeria (PHCN),  Bank of Industry (BoI), Nigeria Railway Corporation,  Federal Mortgage Bank of Nigeria, Bank of Agriculture, Niger Delta Power Holding Company/National Integrated Power Project, National Communication Satellite Limited, Galaxy Backbone Ltd and Ajaokuta Steel Company Ltd. Others are Urban Development Bank, Nigerian Export – Import Bank and Transcorp Hilton Hotel. The circular titled: Approval to Exempt Some MDAs in Line with the e-Collection Mop Up Exercise, read: “Approval is hereby granted to your bank (CBN) to exempt the Accounts of  13 MDAs (category six) as listed below the mop-up in line with the e-Collection Circular No. HCFSF/428/S.1/120 dated 7th August 2015 as these are profit-oriented government business entities that are to pay their dividends into the Treasury Single Accounts whenever they are declared.”

The circular urged the CBN to “note that in line with the Presidential approval, the following as it relates to  NNPC as listed above (S/No.9) under Category 4 should also apply:

“That National Petroleum Invetsment Management Services (NAPIMS) remains classified as an MDA that is funded from the Federation Account under Category 4 of the Circular, being the NNPC business unit responsible for the management of the Federal Government’s investment in upstream activities and funded from direct proceeds of oil and gas revenue.

“That NNPC will continue to preserve the status with respect to NAPIMS Operations Account as well as Escrow Account for Third Party Financing in view  of the Joint Venture (JV) cash funding currently being experienced; and  that all other NNPC’s commercial/business entities as re-classified as ‘Profit Oriented Public Corporations/Business Enterprises’ under Category  6 of the Circular which requires that only dividends from these entities be  paid into the TSA.” When contacted then Mr Ohi Alegbe spokesman for the NNPC at the time said the NNPC will continue, as it has always done, to remit its accruals into the Federation  Account but that the JV cash-call obligations with its partners  will use commercial banks and not the CBN.

Chinedu Moghalu of NEXIM confirmed that NEXIM has been exempted from the TSA sheme while Shola Adeyemo of Transcorp Hilton Hotel said the firm is “aware of such a directive.” An official of BoI who pleaded not to be named said as a developmental institution, BoI does not fall into that category. He noted that BoI manages intervention funds on behalf of the CBN as a result, the BoI will have to be exempted from the TSA arrangement.

It will also be recalled that the Nigerian National Petroleum Corporation, NNPC had denied any wrongdoing over its failure to remit about $13.294 billion to the Federation account over a nine-year period, stating that the funds were utilized legally in running its operations, while the balance of the funds had been transferred to the Central Bank of Nigeria. The NNPC was reacting to the report released by the Nigerian Extractive Industries Transparency Initiative, NEITI, which indicted it for the non-remittance of $3.8 billion and N358 billion in 2013; and $12.9 billion, being dividends received from the Nigerian Liquefied Natural Gas, NLNG, from 2005 and 2013. Speaking at the NEITI Stakeholders’ Dialogue on the 2013 NEITI Oil, Gas and Solid Minerals Reports in Abuja, Mr. Godwin Okonkwo, Group General Manager, Debt Management/Federal Allocation of the NNPC, maintained that the NLNG dividends were never misappropriated or withheld by the NNPC, but that every amount spent from the funds was with the approval of the Federal Government. He explained that a large chunk of the funds, with the approval of the Federal Government, were used to fund various gas projects in the country, while with the advent of the current administration, the balance of the funds had been moved from the Treasury Single Account, TSA, to the federation account in the Central Bank of Nigeria, CBN.

He said: “Before now, the position is that the NLNG belongs to the Federal Government and the NNPC is an arm of the Federal Government.”



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