Nigeria Bans Banks From Forex Trading to Ease Dollar Woes
The Central Bank of Nigeria (CBN) is taking a very tough stance on the failure of banks to remit revenues due to the government. Nine banks operating in the country have been banned from participating in the inter-bank forex market because they held back $2.3 billion collectively from the government. The money in question was generated by national oil and gas companies – the Nigeria Liquified Natural Gas (NLNG) and the Nigerian National Petroleum Corporation (NNPC).
The United Bank for Nigeria owed $530 million to the treasury and the First Bank of Nigeria owed $469 million. Diamond Bank came a far third at $287 million with Sterling Bank close behind at $269 million. The other banks in this list are Skye Bank ($221 million), Fidelity Bank ($209 million), Keystone Bank ($139 million), First City Monument Bank ($125 million), and finally, Heritage Bank ($85.5 million). These banks are also likely to be fined by the government.
President Muhammadu Buhari’s government has also devised a new system for remittances while also putting strict deadlines in place, as part of its tough stance on the issue. The government of Nigeria has created a Treasury Single Account (TSA) into which all government funds are to be remitted. Previously, government agencies maintained individual accounts in banks. The TSA was instituted to bring about increased accountability in the collection and spending of government revenues. The high level of opacity has led to the mismanagement of funds to a very high degree.
While the banks in question admit to having withheld the funds from the government, they blame it on the unavailability of dollars in the country. The central bank has indeed instituted a full currency float recently in order to combat the drop in the naira’s value because of the fall in oil prices. However, its measures have been unable to help the economy and have actually repelled potential investors leading to a serious shortage of dollars. The country has had to face massive fuel shortages and a negligible economic growth rate. Inflation was at a 11-year high this June when it touched 16.5 percent.
The nine banks are in talks with the government to bring a quick resolution to the impasse since it has the potential to create unnecessary upheavals in the country’s financial system. There is a well-founded fear that the negative publicity might cause account holders to withdraw their money in a “run on the banks” causing them to collapse.
Diamond Bank executive Mike Omeife said that the bank was willing to pay the amount due to the government in naira, but the CBN insisted on receiving the money in dollars. Understandably, the banks are eager to remit the money so that they can resume operations in the inter-bank forex market.
As a matter of fact, United Bank of Africa had already cleared its dues to the treasury account. Furthermore, economists and industry experts are calling on the government to view this issue leniently so that the country’s embattled financial system doesn’t get disrupted any further.
Facts About the Treasury Single Account
The Treasury Single Account (TSA) is a public accounting system that uses a single account or a set of linked accounts by the government. It ensures all the revenue receipts and payments are done through something called as the Consolidated Revenue Account at the Central Bank of Nigeria.
The pilot scheme by TSA began in 2012. It used a unified structure of accounting for around 217 government MDAs for transparency and accountability in public fund management.
All the government MDAs always remit their revenue collections to the Consolidated Revenue Account via their individual commercial banks on a fee-for-service payment basis.