Banks operating in the country are working frantically to met the January 18 deadline given to them by the monetary authorities to submit records f the pre-SFEM settlement rate burden.
Investigation showed that quite a substantial amount is involved and banks now fear heavy losses this financial year as a result of the settlement.
According to the public relations manager of Union Bank, Mr. Dayo Shobowale, the bank sent out messages via telex to all its branches to come up with the amount of settlement rates due to each branch.
The branches, he said, are working on it and there is certainly that Union Bank will meet the CBN deadline. The manager said that banks who did not make provision for settling importers deposits with them before SFEM will certainly suffer now. As for Union Bank, the bank had made sufficient provisions and has nothing to fear. The effect of the settlement rate on the bank will be marginal, he said. He further disclosed that there was a lot of idle cash balance with banks before the settlement rate issue came into effect.
This, the bank’s public relations boss said is not quite a good thing. A research economist with the United Bank for Africa said that UBA made provision for importer’s deposit wit the bank for settlement of imports which they could not transfer at the time of deposit due to foreign exchange problems.
The research economist disclosed that the amount involved is still being worked out but said the amount is much.
The economist further disclosed that the idle cash improved the liquidity position of banks in the period of 1983-1987.
The payment of such money to the Central Bank will certainly reduce the liquidity positions of banks and thus being lending ability.
According to them, smallers banks which did not make the necessary arrangement for the payment are likely to be adversely affected. They feared that the profit margin of banks will drop this year.
Another economist with the Nigeria Merchant Bank disclosed in the course of investigation that banks made huge profit from money importers deposited with them.
According to him, banks are not making much ado about the issue because they realise how much profit they made from the money in the past. Certainly the banks are going to suffer loss of fund from the settlement.
According to the Nigeria Merchant Bank sources, the settlement rate issue is entirely the problem of the banks and the Central Bank which through their inefficiency they were unable to transfer the money to as at when due.
The federal government through the Central Bank on December 16 last year approved settlement rate for eligible pre-SFEM foreign exchange transactions.
According to the CBN circular, all outstanding under deferred payment, external loans, buyers and suppliers credit payments, which the federal ministry of finance has granted or approved in principle and for which forms ‘M’ were registered not later than September 26, 1986 shall be executed at the official exchange rate prevailing as at September 26, 1986.
According to the circular, the settlement rate for bills for collection, open accounts and unconfirmed letters of credit shall be the official rate prevailing on September 26.
According to the CBN sharing of the burden, an importer who paid the local currency equivalent in respect of the transaction before September 26, 1986, shall be responsible for the exchange loss arisig up that date while the government will be responsible for the exchange loss thereafter.
The importer the circular said shall also be liable for the off-shore interest charges payable up to the date of lodgement of the naira equivalent of th transaction with his bank.
Also where an importer paid the local currency equivalent to his bank in respect of the transaction after September 26, 1986, he shall b responsible for the burden of exchange rate depreciation up to September 26, 1986 as well s the naira equivalent of the off-shore interest charges to the date of payment in local currency to his bank.
According to the burden sharing, banks with which the naira equivalent of import transaction were lodged by customers, shall be responsible for off-shore interest charges from the dates of payment by customers to the time of the lodgement of the naira funds with the Central Bank.
The banks it was gathered, shall be allowed to write-off the provisions made on account of their share of the burden of exchange rate depreciation for a period of 10 years.
