CBN Governor, Godwin Emefiele

By Henry Oduah


Financial market operators, particularly those in the money markets, moan that they have lost confidence in the Central Bank of Nigeria (CBN) for its policies and actions which they say are intended to ruin the financial system.

Investigation by TheNiche showed that CBN top executive came under fire from the Ministry of Finance after it was learnt that huge dollar dividend earnings belonging to government agencies were not remitted to the treasury single account (TSA).

But the Ministry of Finance has distanced itself from unremitted funds, saying the CBN can hold its own. It was learnt that since CBN Governor, Godwin Emefiele, could not convincingly explain why the banks retained the monies in their coffers in defiance of President Muhammadu Buhari’s directive, he quickly issued sanctions against the banks to suggest CBN’s innocence.

A former treasurer at one of the sanctioned banks said that the CBN was aware of the transaction between the Nigerian National Petroleum Corporation (NNPC) and the banks, except if there was a breakdown in communication within in the CBN or some of its departments are working at cross purposes.

“As a former treasurer in a bank, I want to tell you that there is no such dollar denominated transaction that can happen in any bank without the CBN knowing it. It is practically not possible.

“It is rather ridiculous that the regulator claimed the [banks] concealed such large ticket transactions involving the three parties, the NNPC, banks, and the CBN. It merely shows that something is wrong somewhere,” the source said.

The sanction

The CBN on Wednesday, August 24 barred nine banks from the foreign exchange (forex) market for failing to remit $2.12 billion deposits of the Nigerian National Petroleum Corporation (NNPC)/Nigeria Liquefied Natural Gas (NLNG) into the TSA.

The banks are First Bank ($469 million), Diamond Bank ($287 million), Sterling Bank ($269 million), Skye Bank ($221 million), Fidelity Bank ($209 million), Keystone Bank ($139 million), First City Monument Bank ($125 million), and Heritage Bank ($85 million).

The CBN readmitted only United Bank for Africa (UBA) after it paid up, leaving eight banks suspended from dealing in forex interbank transactions.

Reports said that when Buhari was briefed on the matter, he directed that all the banks should move the monies to the TSA without further delay.

Some 12 hours after the CBN pronounced the sanction, the banks countered that it was a normal loan transaction, and denied concealing the money for the NNPC.

A managing director and chief executive officer of one of the banks told TheNiche that the LNG dividend money was a normal loan transaction between the NNPC and the banks with a schedule to return the money.

“The CBN said they are banning us from foreign exchange market, alleging that we are aiding the NNPC in concealment of LNG dividend money. There’s no concealment in the transaction.

“It is a normal loan transaction that we have a schedule for returning it. And banks have been returning the money but there is no foreign exchange to return it. It is not concealed,” he insisted.


Facts give the CBN away


A circular issued by federal Accountant General, M.K. Dikwa, to CBN Director of Banking and Payments System Department on September 14, 2015 said that the dividends due to the NNPC from the NLNG were exempted from TSA.

Also exempted were a couple of other ministries, departments, and agencies (MDAs), including

  • Then Power Holding Company of Nigeria (PHCN).
  • Bank of Industry (BOI), Nigerian Railway Corporation (NRC).
  • Federal Mortgage Bank of Nigeria (FMBN).
  • Bank of Agriculture (BOA).
  • Niger Delta Power Holding Company/National Integrated Power Project.
  • Ajaokuta Steel Company.
  • Galaxy Backbone.

As of September 15, 2015 the deadline for TSA implementation, some of the banks had paid back over 50 per cent of the funds based on the repayment timetable agreed with the CBN, evidence that both the CBN and the NNPC had a clear picture of the status of these funds with the banks.

Owing to dollar illiquidity, banks which were unable to remit the funds to government coffers at agreed with the CBN after a meeting that the remittance of these NNPC funds be staggered so as to mitigate the negative impact it might have on the economy.

Emefiele was said to have invited the CEOs of all the banks that had the funds for a meeting in Abuja to reconcile the amount in each bank with the records of the CBN/NNPC, and to agree on a repayment timetable.

UBAUBA explained in a statement on Wednesday, August 24that it had fully remitted every kobo due to the NNPC and was surprised that the CBN included its name among the banks sanctioned.

The following day, CBN admitted sanctioning UBA in error, and readmitted it into forex operations.

“Further to our press statement of yesterday, [August 23], we are pleased to inform our valued customers, stakeholders and business partners as well as the general public that the CBN has re-admitted us into the foreign exchange market following our remittance of all NNPC/NLNG dollar deposits,” said UBA Head of Corporate Communications, Charles Aigbe.

Fidelity Bank

But Fidelity Bank Managing Director and Chief Executive, Nnamdi Okonkwo, explained that the LNG dividend money was a normal loan transaction between the NNPC and the banks lenders with a schedule to return the money.

“The CBN said they are banning us from foreign exchange market, alleging that we are aiding the NNPC in concealment of LNG dividend money. There’s no concealment in the transaction.

“It is a normal loan transaction that we have a schedule for returning it. And banks have been returning the money but there is no foreign exchange to return it. It is not concealed,” the bank boss explained.

Keystone Bank

A statement by the management stated: “Our attention has been drawn to media publications to the effect that the CBN has excluded some banks including Keystone Bank Limited (Keystone) from further participation in the forex market until the issue of non-remittance of funds belonging to the NNPC to the TSA is resolved.

“We wish to assure you that Keystone Bank riposted that it “has always made full disclosure of outstanding TSA funds, and had at various times diligently engaged the CBN and relevant stakeholders for resolutions to enable the bank fulfill the TSA obligations in the face of challenging market conditions.

“All our efforts are geared towards very timely resolution as we understand the importance of sourcing foreign exchange for our customers’ needs to support economic growth….there will be constraints in establishing new letters of credit until the issue is resolved.”

Sterling Bank

Sterling Bank ““We consider it necessary to respond to news reports of the suspension from the interbank FX market of nine commercial banks (Sterling Bank included). To set the records straight, management wishes to clarify as follows:

. The bank unequivocally rejected the suggestion that it failed or neglected to disclose at any time, any sum held on behalf of its clients to the regulatory authorities as such balances were fully captured in the relevant regulatory returns.

In actual fact, the bank affirmed that it went beyond this basic requirement of disclosure and reporting to holding several meetings with the parties involved.

“While the current situation is a broader sector issue arising from the foreign currency illiquidity in the domestic banking sector, Sterling Bank continues to work with its client and the banking regulator to resolve the situation in the shortest possible time,” it said.

“We would like to restate that the bank at all times reported the balances involved to the Central Bank and at no time concealed or refused to remit the funds as documented in several written correspondences.

“Arising from our continuing efforts in this regard, we have reduced the outstanding sum to the current level within a very short period.

“As an institution built on the core values of integrity and sound corporate governance, Sterling Bank has always complied with all regulatory and other operating requirements and the TSA regulation is no exception to this proud record.”

The markets react

Also on Wednesday, August 24, the naira slipped to N402 per dollar on the open black market, just a day after the CBN sanctioned the nine banks. Forty-eight hours after, the naira jumped to N412 to a dollar. The local currency had closed at N397/dollar on Tuesday, August 23, a day earlier but at the interbank market, closed at N315.93/dollar, lower than N305.5 it recorded the same day.

On Thursday, August 25, the naira jumped to N409 per dollar and got to N412 on Friday, August 26.

Operators blamed the CBN’s sanction for the collapse and free fall of the naira collapse against the dollar.

The suspension of the banks had ignited some unintended consequences as there were no trades on the interbank market on Wednesday, August 24 until three minutes before the end of the session, when the CBN intervened with dollar sales, TheNiche learnt. Only three deals worth $0.75 million were traded at N305.50 per dollar, the level the market has closed at since Monday, August 22.

At the equities markets, investors have been dumping shares in response to declining confidence in the economy, particularly the financial markets.

On Wednesday, August 24, shares in Diamond Bank fell the most, shedding 7.32 percent in early trade, followed by Sterling Bbank which was down 3.88 percent.

FCMB fell 2.5 percent, FBN Holdings shed 1.5 percent, while Skye Bank was down 1.54 percent.

With inflation rate hitting an 11-year high at 16.5 percent in June, the CBN has continued on flip-flop of policies that have jeopardised the economy and kept investors away from the financial market and the economy generally.

Former investment banker, Malomo Oladapo, decried the CBN’s action as uncalled for.

Oladapo, who now operates a stock brokerage firm, said that the transactions in which the banks invested the money could have been approved by the CBN and the returns filed for their regular appraisal and in the interest of all parties.

Banks breached procedure, CBN insists

TheNiche sought the reaction of the CBN through its spokesman, Isaac Okoroafor, but he did not respond at press time as he was out of the country.

However, an authoritative source in the CBN confided in TheNiche that it was professionally wrong for the banks to have disregarded regulation by using funds which ought to be remitted immediately to the TSA as long-term and medium-term loans.

The source said: “When banks and their customers transact businesses, it is not CBN’s business provided those transactions comply with regulatory requirements. The CBN does not go into the thousands of transactions being made, it is only during examination that the CBN can come across some of these things.

“Even if that was a loan, why would you use such a loan to fund a long-term project? Isn’t it a breach of institutional guidelines? If you get NNPC or NLNG money, it belongs to the federation account which can be shared at any time.

“Now even if it is money that is set aside or budgeted, that is a working capital, it’s a cash flow resource. Now how can you use such money to make long-term loans or even medium term?

“Such monies are usually used for short term (loans) so that you can easily release them when they are due. It is the same breach of operational guidelines which we are talking about.

“It is wrong for them to have used that money and they have to pay back.

“What Nigerians should understand is that we don’t have dollars and there is nothing we can do to print the currency. The CBN doesn’t print dollars.

“Until we begin to discourage the importation and consumption of foreign goods and services, the naira will continue to run into trouble. All the CBN is trying to do is manage the situation so that it doesn’t depreciate so much.”

Our source alleged that the action of the banks’ CEOs was criminal deserving of imprisonment.

“If the government says the NNPC and NLNG should bring their money, it has nothing to do with the CBN. All we are trying to do is, as a government bank,  ensure they return government money.

“Such people are supposed to be in jail. They are so incompetent.”

We are not involved, says Finance Ministry

Money market operators accused Emefiele of caving in to pressure from the Ministry of Finance in order to keep his job in the face of daunting dollar illiquidity.

But Finance Minister, Kemi Adeosun, speaking through her Media Adviser, Festus Akambi, denied the charge –saying the CBN is autonomous and does not need the ministry’s prodding to carry out its duties.

Adeosun pleaded to be left alone in the unfolding CBN/bank CEOs’ saga.

CIBN reacts

The Chartered Institute of Bankers of Nigeria (CIBN) faulted the action of the CBN.

The CIBN, which comprises banks’ CEOs and other key financial operators who met and discussed the implications of the sanctions on the economy, clarified that there was no concealment of the exposure in any form.

A statement by CIBN Registrar and CEO, Seye Awojobi, pledged that “as professionals who understand what is at stake, [we] would work towards ensuring that the concerned banks comply with the directive of the apex bank as soon as possible to avoid negative impact on the economy.”

The CIBN insisted that the banks had always disclosed the funds in their returns and explained that the situation arose out of the maturity mismatch of funds found in certain strategic sectors to ensure the growth of the economy.

It promised to work closely with the CBN to address the issue in a manner that will protect the stability of the industry, as well as ensure proper conduct in the optimisation of the forex market.

Arrest of bank CEOs looms

On Friday, August 26, the failure of the banks to fully comply with the directive from the CBN to remit what they are believed to be owing the government may lead to their being visited with the full weight of the law.

According to a Presidency source, Buhari may not bother if the managing directors and CEOs of the banks are arrested to compel them to pay up immediately.

“Emefiele is aware of the thinking of the Presidency and has been fully advised on the return of the money by banks and how he goes about getting compliance is up to him,” TheNiche was reliably informed.