CBN rejects banks’ appeal to reduce penalty for forex default

An appeal at making the Central Bank of Nigeria (CBN) reduce its newly reviewed penalty on commercial banks on abuse of foreign exchange (forex) guidelines and other inter bank transactions, has failed to yield results.

Following the review of the CBN financial guideline circular titled: “Amendment of S4 Business Rules and Guidelines” from January 2017, an eight-week suspension for banks that violate forex rules is now operational in Nigeria.

Section 10.1 of the guidelines says any forex transaction with the CBN must be settled within a 24-hour window, unlike the former rule which gave three-days limitations.

About five banks were said to have been penciled down for sanction, having allegedly violated the rule in the first week of February, 2017.

According to the operational guidelines, emphasis is to be given to foreign exchange (forex) trading among banks and other authorised dealers to reduce abuse, believed to have been responsible for losses in value of naira.

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“Defaulting banks risk eight weeks suspension, or heavy fine, in addition to losing any bidding to other competitors in queue,” the apex bank stated.

But the bankers committee, after a series of meetings resolved to take up the matter with the management of the CBN to reduce the high tone of the circular.

It was learnt that the meeting at the CBN corporate headquarters in Abuja ended on Thursday with a promise by the apex bank that if there was any need to revisit the guideline, such would be after the rule had been given opportunity to operate.

A source told Ripples Nigeria that the bankers were told that the policy is one of the steps put in place by the regulatory body to return sanity in the system.

“It is not aimed at undermining progress of the banks and other licences operators,” the CBN management reportedly told the delegation.

But an executive director of FCMB, put it this way: “The CBN is doing its work, which is to monitor and guide development in the system, but it must be seen done with human face. A situation where consideration is not given to some emerging realities of today is not going to help operators.

“There are times over night cash request becomes too pressing to meet placing some hurdles in the way of banks in such a situation, as the circular intends to do, will not augur well for the system.”

The circular actually states that where there are no securities, inter fund application (overnight market) shall be cancelled and the defaulter suspended from other biddings.

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