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Access, Zenith, Stanbic, First Bank others pay N2.45bn fines for FX infractions

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Nigerian banks who have been touting their abilities to superintend over the retail end of the Foreign Exchange (FX) market since the ban put in place by the Central Bank of Nigeria (CBN) on FX sales to Bureaux De Changes (BDCs), may have to explain why they paid billions of naira as fines last year to the CBN for contravening several banking rules and regulations related to foreign exchange.

The financial statements of ten banks analysed by MoneyCentral show they paid a cumulative sum of N2.45 billion as fines to the CBN for various FX related infractions.

The banks are Zenith Bank, Access Bank, GTBank, FBN Holdings, United Bank for Africa (UBA), Fidelity Bank, Union Bank, Stanbic IBTC, Sterling Bank and FCMB.

Topping the list of penalties paid for FX infractions in 2020 was UBA which paid N623 million to the CBN in respect of operation of customers’ domiciliary accounts, this was followed by Access Bank which paid N451 Million in fines in respect of sourcing for FX from the Nigerian FX market for the importation of Textile and contravention of CBN FOREX manual and TED ACT, among other violations, Fidelity Bank which paid N444.4 million penalty for FX Infraction in textile importation as directed by CBN and other FX related penalties and Guaranty Trust Bank (GTBank), which paid N267 million for customer’s use of FX sourced from official market for textile importation and CBN Spot check examination on domiciliary account balances of customers.

Others are Stanbic IBTC which paid N259.2 million in fines in respect of an alleged contravention of the provision of memorandum 25(5)(b) of the CBN’s FX Manual in processing FX transfers and foreign exchange rules on import of textiles, FBN Holdings which paid N218.4 million for involvement in Textile-importation using FX sourced from Nigerian Market as well as contravention of Memorandum 25(b) of the FOREX manual and FCMB which paid N143.2 million for involvement in the importation of textile using FX sourced from the Nigerian FX Market and other domiciliary account related fines.

Finishing off the list was Sterling Bank which was fined N30 million for non-processing of e-Form M for importation of goods, Zenith Bank which paid a penalty to CBN of N11.4 million relating to customer domiciliary account operations, and Union Bank which paid a penalty of N10 million for involvement in importation of textile using forex from the Nigerian forex market.

Analysts say that while the banks may have some good intentions in believing they can fill the roles of the 5,689 BDCs registered in Nigeria as at June 30, 2021, it’s more likely the banks will be overwhelmed leading to more fraud and infractions perpetrated by their staff.

“The bank CEOs know it won’t work but they no longer argue with the CBN Governor,” an investment banking source speaking on condition of anonymity told MoneyCentral.

“They just want to show some movement.”

The Body of Bank Chief Executive Officers (CEOs) released a statement last week projecting that Naira exchange rate to the dollar is expected to recover to at least N423, after its spike to above N500 per dollar, following the Central Bank of Nigeria’s (CBN’s) recent directive to stop forex sales to Bureau De Change (BDCs).

The naira was quoted at N525 per dollar in the parallel market in weekend trading, MoneyCentral’s survey shows.

The Chairman, the Body of Bank CEOs, Herbert Wigwe, at an online press conference, stated that the banking industry is ready to begin the sale of foreign exchange to customers, maintaining that banks have broader sources than BDCs to meet customers’ forex needs.

“The banking industry is fully ready and able to carry out this function and as you know that banks have very strict compliance measures in terms of Know Your Customers (KYC) and in terms of verification in making sure that those who apply are eligible. We are going to provide these services and ensure that our branches across the country meet these requirements,” Wigwe assured.

However, Obadiah Mailafia, former deputy governor of the Central Bank of Nigeria (CBN), said that commercial banks in the country cannot be trusted with forex sales, adding that they will “corner” the dollars and only release whatever that is left after satisfying their interest.

Mailafia was reacting on Wednesday to the recent decision by the CBN to stop the sale of foreign exchange to Bureau de Change (BDC) operators.

The former deputy governor of the Central Bank of Nigeria featured on The Roundtable, an online interview programme.

“How can you totally trust these commercial banks because most of them will want to corner the dollar for themselves and whatever is left, then they can now share with the market at a rate they want?” Mailafia said.

“If we are not careful, that decision will actually worsen the naira value because the BDCs, you could walk into any of them anywhere and within five minutes, they will attend to you but the banks, you have to drive to your nearest bank, you have to queue most of the time.

“The CBN has not told us the rate, the banks will want to make a profit over the official rate, we don’t know whether they will make a decent profit or they will profiteer. Bankers were the biggest experts in round-tripping. Old habits, I don’t think they change. Leopards are very unlikely to change their spots.”

Other analysts seem to concur with Mailafia.

Bismarck Rewane an economist and CEO of economics consulting firm Financial Derivatives Company (FDC), said:

““The interim solution of substituting BDCs with banks is hardly going to achieve much. You are virtually handing over the yam barns to goats to secure. In the end, there will be no yams nor goats.”

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