CBN may sanction banks over failure to meet forex terms

By Odunewu Segun

Some of the banks appointed by the Central Bank of Nigeria as Foreign Exchange Primary Dealers may be axed by the apex bank for failing to meet CBN’s forex terms, National Daily has gathered.

Recall that the CBN appointed FirstBank, Zenith Bank, UBA, Access Bank, GTB, Stanbic IBTC and Ecobank Nigeria and some others shortly after floating the naira last month to boost dollar liquidity in the forex market.

National Daily gathered that the decision to reconsider the status of the FXPDs is because their poor performance at the forex market. It was gathered that the banks recorded low forex volumes of transactions against set guidelines, falling short of the expectations of the CBN, and the continued dollar scarcity in the country.

Since their appointment in June, the CBN has consistently been intervening in the market, with little or no inputs from the lenders because of poor dollar liquidity. The CBN intervened via the Special Secondary Market Intervention Sales (SMIS) – Retail (End-users) and the Interbank FX market to clear a total forex backlog of $4.02 billion in the early days of the policy.

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Currencies Analyst and Head Treasury at Ecobank Nigeria, Olakunle Ezun, said the CBN still remains the major supplier of dollar to the market despite the appointment of the FXDPs banks.

Ezun admitted that forex liquidity remains a challenge despite CBN and FMDQ efforts to support interbank forex market with Forwards and Over-the-Counter (OTC) Forex Futures/Naira Settled Forwards transactions.

“The CBN’s ability to meet its matured obligations as at when due is not in doubt, but recent development as per frequency and volume of CBN’s forex sales to the Foreign Exchange Primary Dealers (FXPDs) have questioned CBN capacity to support the market as growing import and investment demand are not being settled,” Ezun added.

According to the guidelines, FXPDs bank that record low volumes of FX transactions with the CBN during the evaluation period, that repeatedly provide bids and offers that are not reasonably competitive, or that fail to provide useful market information and commentary, shall be deemed not to have met the expectations of the CBN.

When contacted, CBN Acting Director, Corporate Communications, Isaac Okorafor, said the FXDPs policy is still in force. He said the apex bank, like every other participant, intervenes in the market only when the need arises.