Forex violations: CBN steps up penalties on banks

In its bid to check foreign exchange arbitrage and speculation, the Central Bank of Nigeria (CBN) has intensified sanctions on banks caught violating its foreign exchange regulations, the New Telegraph has learnt. Industry sources who pleaded anonymity on the issue because of its sensitive nature, told our correspondent that in recent times the apex bank has imposed tough sanctions on such banks. They disclosed that while some of these lenders have been levied huge fines, others have been barred from participating in some categories of foreign exchange transactions. For instance, a former banker and forex dealer revealed that CBN recently banned several medium-sized lenders from offering foreign currency telegraphic transfers services (wire transfer of funds) to their customers for violating regulations on such transactions.

He said: “These banks were frequently transferring more than the allowed maximum limit of $10,000 per day on behalf of their customers until the CBN found out and barred them for some months from making these transfers.” He pointed out that the CBN sanction significantly hurt the affected lenders as they had been getting a lot of income from it. “I don’t know how they were doing it, but they really got away with it for a long time. While other more conservative banks were scared of taking the risk, customers who wanted to transfer forex were rushing to these banks. From the way things were going I knew it was only a matter of time before the CBN discovered their tricks.” He, however, disclosed that the regulator had partially lifted the ban and restricted the affected banks to forex outflow transfers of $10,000 per week. Indeed, only last week, at the interactive forum on the CBN’s forex policy organised by the Lagos Chamber of Commerce and Industry (LCCI), the Director, Monetary Policy at the apex bank, Mr. Moses Tule, revealed that the CBN regularly fines   banks for various forex violations but does not announce such sanctions in order not to send wrong signals to the public.

He said: “We don’t allow the banks to get away with violations of forex regulations. Any bank caught is severely penalised. For instance, I can tell you that in this country a bank has been fined N400 million for such violations.” Analysts point out that the banks usually derive a significant part of their income from forex transactions and that the CBN’s recent forex policies have significantly impacted lenders’ earnings. Consequently, many banks have faulted the CBN’s forex measures and called on the apex bank to devalue the naira. Just a few weeks ago, Managing Director and Chief Executive Officer of First Bank of Nigeria Limited, Mr. Bisi Onasanya, said that the CBN needs to let the naira devalue as the foreign exchange trading restrictions used to keep the currency stable were starting to harm growth in the country’s economy. The First Bank boss said: “People just don’t believe that the CBN has what it takes to sustain the exchange rate at the present level. “The market needs to reopen. You cannot peg the naira at a level that the whole world knows is unrealistic.” The CBN has, however, insisted that it will penalise banks and Bureaux de Change (BDC) that flout its forex regulations.