Nine banks were reportedly banned this week from foreign exchange trading for failing to remit some oil money into a government account are holding talks with the Central Bank to seek a truce, operators said Thursday, August 25.
The Central Bank of Nigeria (CBN) on Tuesday reportedly suspended nine banks for withholding 2.12 billion dollars belonging to the Nigerian National Petroleum Corporation (NNPC) and the Nigeria Liquified Natural Gas (NLNG) contrary to a government regulation.
“We have been meeting with CBN officials to find a way out of the impasse because, if the crisis persists, it may have very dire consequences on the financial system,” a top executive at one of the affected banks said.
He said the ban might trigger “a run on the banks” as concerned customers withdraw their deposits.
“Customers may think the suspension is a signal of distress and may rush to take out their money,” he said.
Nigeria’s oil-dependent economy is in recession because of low oil prices and resulting foreign currency shortages, hammering government revenue and pushing inflation to an 11-year-high of 16.5 percent in June.
The administration of President Mohammadu Buhari, who took office in May last year, ordered all government revenues to be paid into Treasury Single Account (TSA) in the CBN to prevent fraud, and in his fight against corruption.
The United Bank for Africa (UBA), one of the suspended banks, said its ban had been lifted after it remitted $530 million.
“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,” spokesman Charles Aigbe said in a statement.
Financial experts want the regulators to be lenient with the banks.
“We should not kill an ant with a sledge-hammer. Banning nine banks from the forex market at this time of recession will worsen the situation,” Pascal Odibo said, warning the ban would deny importers and forex users the opportunity to obtain forex through erring banks, ramping up pressure on the black market.
“The implication is that everybody will go to the parallel market to source for forex and this will continue to push up the rate,” warned Odibo, who suggested fines rather than a ban which Wednesday pushed banking stocks down.
Currency traders said the naira depreciated further on the black market following the suspension, crossing the 400 mark to trade at 402 on Wednesday from 396 Tuesday.
The official rate is 305 to the dollar on the official inter-bank market.
The CBN floated the naira in June by scrapping the officially pegged rate of 197/199 which had caused forex shortages and currency woes in one of Africa’s largest crude producers.