Banks' low compliance to dollar sales, a call for responsibility outsourcing - Businessday

September 7, 2016
Since the Central Bank of Nigeria (CBN) took a decision to open foreign currency sales window from the proceeds of international money transfers to Bureaux De Change (BDC) operators, and subsequently increased the weekly dollar sales by banks to BDCs from $30,000 to $50,000, there has been a noticeable low compliance to the directive.

The reasons given by deposit money banks bother on non-availability of dollar, BDCs update on Know Your Customer (KYC) and lack of defined commission or rate.

Of recent, banks were being sanctioned over regulatory breaches. One of these breaches is the failure of nine banks to remit $2.274 billion belonging to the Nigeria National Petroleum Corporation (NNPC) and Nigeria LNG into the Treasury Single Accounts (TSA). Findings by the CBN that several other banks are abusing international money transfer guidelines are also disturbing.

There are concerns that in view of the challenges faced by banks, they may not rise to their responsibility of selling the amount of dollar prescribed by the CBN to BDCs.

Analysts also said diaspora remittances might overtake oil proceeds this year. Nigeria projects oil exports to rake in $44 billion, but if Joint Venture portions for International Oil Companies and production costs are stripped off, Nigeria's take will probably be around $21 billion this year and estimates point to diaspora remittance coming in at between $23 billion and $24 billion. Nigerians in diaspora sent in $21 billion last year to their families back home.

Consequently, stakeholders are calling on the Central Bank to outsource the dollar sales role to a reputable independent distributor that would make the funds readily accessible to the BDCs. This, they insist, would strengthen the foreign exchange market.

This is more so as Bureaux de Change industry remains a critical agent for Nigeria's economic growth and stability of the foreign exchange (forex) market.

The banks resistance to CBN's directive to sell $50,000 weekly from Diaspora remittances to BDCs has been worrisome. The banks refused to obey the order despite several pleas by the apex bank that they disburse the funds to the BDC operators to boost liquidity in the forex market.

Responding to developments, Aminu Gwadabe, president, Association of Bureau De Change Operators of Nigeria (ABCON) said only 10 percent of BDCs from the Lagos market have so far accessed dollar from banks since the CBN gave the directive nearly a month ago.

"The proceeds of the international money transfer funds are not CBN money. It is not from the foreign reserves of the CBN. This is the money that Nigerians in diaspora are sending into the economy. Before, this money came through unofficial means, some sending through hands, and at the end of the day, the beneficiary will not even get the money. And in other countries, the Diaspora funds are strictly for BDCs," Gwadabe said.

He urged the CBN to outsource the dollar distribution role to independent distributor since the banks have failed in their assigned role. The banks that are so far involved in the dollar sales to BDCs include FirstBank, Ecobank Nigeria, Fidelity Bank, United Bank for Africa and Unity Bank. Others are Diamond Bank, Zenith Bank and Stanbic IBTC Bank.

Furthermore, Gwadabe disclosed that BDCs in Port Harcourt, Kano, Abuja, Onitsha, Maiduguri, Benin and Enugu, are yet to get a single dollar from these banks. The ABCON chief said that the banks are also selling dollar far above the interbank rate. The banks, he added, are supposed to sell to the BDCs on the same day within the week, but have failed to do so. "Instead of staggering the payment, the banks should sell to the BDCs on the same week day, so that the impact will be felt in the market," he said.

Continuing, he said, "Our members across the country have funded their accounts but the banks are not selling to them. The BDCs that met the CBN's policy guidelines on the disbursement and cleared by the banks have still not received a dime from the banks." "I think the banks are compromising the policy and CBN's directive on the matter. And like I said earlier, since the banks are not co-operating, I expect the CBN to take that role from them and assign it to a reputable independent distributor," he added.

W.D. Gotring, CBN acting director, Trade and Exchange, had through a circular to authorised dealers directed that all agents of approved IMTOs to sell $50,000 weekly foreign currency accruing from inward money remittances to licensed BDCs. The directive was meant to ensure stability of the exchange rate and encourage participation of critical stakeholders in the foreign exchange market.

The acting director, in a circular to authorised dealers titled: Re: Transactions in 'Free Funds' by Authorised Dealers, also accused the banks of buying and selling forex without following stipulated guidelines. "The CBN has noticed that some Authorised Dealers have continued to buy and sell foreign exchange referred to as 'free funds' despite the provision of the circular of March 4, 2004 on the subject," he said.

He reiterated that as provided in the laws and regulations governing dealings in forex, authorised dealers should not sell forex without appropriate documentation and disclosure to the regulatory authorities irrespective of the source of the funds.

"Accordingly, authorised dealers shall deal in eligible transactions only, and not to engage in any foreign exchange transactions on terms inconsistent with the extant laws and or regulations," he said.


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Read Comments

Steven Rich
Sep 17, 2018:
Well done

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