Nigeria’s Central Bank Readmits Nine Leading Banks to Forex Market

mohammadu-buhari-officialA potential financial crisis was averted in Nigeria when the country’s central bank revoked the suspensions of nine leading banks that had been banned from trading in the highly profitable forex market. The banks had been punished for their failure to remit a total amount of $2.12bn in dollar deposits to the government. The money in question had been generated by Nigeria’s petroleum companies, Nigerian National Petroleum Corporation (NNPC) and Nigerian Liquefied Natural Gas Company (NLNG), and should have been deposited into a Treasury Single Account (TSA).

The nine banks that had been suspended by the Central Bank of Nigeria (CBN) were the United Bank for Africa, First Bank of Nigeria, Diamond Bank, Sterling Bank, Skye Bank, Fidelity Bank, Keystone Bank, First City Monument Bank, and Heritage Bank. The largest amount due was $530 million and the smallest was $85 million. The United Bank Of Africa had been readmitted to the forex market last week when it remitted the $530 million held by it on behalf of the NNPC and NLNG.

CBN’s Director of Banking Supervision, Mrs. Tokunbo Martins, briefed the media about the latest development saying that the central bank’s the Committee of Governors had conducted discussions with the Body of Bank Chief Executive Officers and the Chartered Institute of Bankers of Nigeria before coming to a decision. The eight remaining banks had shared details of their payment plans concerning the outstanding amounts.

Mr. Herbert Wigwe, Managing Director, Access Bank commented on the situation, saying that all the banks concerned would meet their commitments regarding the re-payment plan. Furthermore, he said that the banks would work together to ensure that such a situation would not arise again and that issues like this would be resolved quickly.

Nigeria’s government under Muhammudu Buhari has committed itself to removing opacity in financial dealings so as to improve the economy, and the action against the defaulting banks is seen as example the government’s no-nonsense stance against wrongdoing. However, the banks maintain that the crippling shortage of US dollars brought about the flight of investors from the country prevented them from remitting the dollar payments.

The President of Nigeria, Muhammudu Buhari has been in office since 2015.  A self-confessed converted democrat, he has received several awards and medals. He has served in the Nigerian Army and is a retired Major General.

Nigeria’s economy is under severe pressure because of a steady drop in oil prices combined with an inability to maintain oil production levels caused by an increase in militancy in the oil producing areas. Potential investors have also proved to be reluctant to enter risky markets especially in the wake of Brexit turbulence, given that many experts feel that it might fuel a recession. Another factor that will affect the country’s economy is Saudi Arabia’s increased oil production that will continue to drive oil prices down.

Economists had warned that the government would cause massive economic problems if it pursued its case against the nine banks because it might have led account holders to queue up to withdraw their money. It is definitely reassuring to see that the government is taking a reasonable and long term approach to address its monetary woes and to avoid these problems from occurring again. The ban was lifted from the nine banks and they were able to start trading in the forex market. This ensured that the ban didn’t affect the economy in a major way.