Naira strengthens, as bank CEOs pledge support for new CBN FX policy

The naira appreciated to N520 to a dollar on the parallel market on Thursday, stronger than the N525 to a dollar it closed the previous day. The appreciation came as Chief Executive Officers (CEOs) of banks promised to support the new foreign exchange (FX) measures of the Central Bank of Nigeria (CBN) and the regulator’s effort to achieve FX stability.

On the Investors and Exporters’ (I & E) FX window, the naira closed at N411.67 to a dollar yesterday.

CBN also said it will commence the refund of capital deposits and licencing fees, where applicable, to Bureau De Change (BDC) promoters who had pending licence applications before Tuesday’s announcement of the end of FX sale to the currency dealers.

The apex bank insisted it would not rescind the ban on FX sale to BDCs. Director, Monetary Policy Department, CBN, Dr. Hassan Mahmud, said this yesterday when he featured on “Arise Xchange,” a programme monitored on Arise News Channel, a THISDAY sister broadcast station.

Meanwhile, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, reacted yesterday to the CBN’s policy announcement. Gwadabe said the association would engage with the banking sector regulator to address and resolve all the issues that led to the ban on FX sale to its members.

CBN Governor Godwin Emefiele had disclosed the end of FX sale to BDCs while briefing journalists at the end of a two-day meeting of the Monetary Policy Committee (MPC) in Abuja on Tuesday. He directed all commercial banks to immediately create designated branches for the sale and disposal of FX to eligible customers for legitimate purposes. He also said the CBN will no longer process or issue new licences for BDC operations in the country, adding that all licences being currently processed, regardless of the stage, had been suspended.

The CBN governor said the bank would now channel weekly FX allocations, hitherto meant for BDCs, to commercial banks.

Speaking yesterday during a virtual media briefing, Chairman, Body of Bank CEOs, Herbert Wigwe, said authorised financial institutions in the FX market would ensure full compliance with the CBN directives in order to ensure FX stability. Wigwe said customers could walk into their banks to purchase dollars for legitimate transactions. He noted that the banks had agreed that the process would start immediately following a meeting with the CBN.

Wigwe, who is also Group Managing Director of Access Bank Plc, said the banks were ready to meet the mandate of the CBN, adding that they have more than enough capacity to deliver. He explained that the process would be centralised to avoid abuse.

The Access Bank GMD pledged that the banks would ensure that the measures that had been put in place were not disrupted and abused, saying, “We will also be doing verification of the Bank Verification Number (BVN).”

In addition, Wigwe said banks yet to adhere to the mandate by the regulator to create a forex desk would be sanctioned.

According to him, “The banking industry is willing and ready to carry out this function. As you are aware, the bank has very strict compliance measures in terms of Know Your Customer (KYC). For us at Access Bank, we will ensure that all our branches meet the requirements.

“If you look at all the banks, you would agree with me that the banks have more than enough capacity to deal with the mandate of the CBN. “If we see non-compliance issues, we will report to the CBN and the law enforcement agencies. So if people intend to do things, such as coming with a second passport and other things, we will report them to the law enforcement agencies.”

He added, “We feel that what the CBN has done is worthy of commendation because people will have access to different channels to collect their BTAs and school fees required for their children.

“The banks have a lot more channels to assist the customers get access to forex, depending on where they are, even if they are in Enugu or Port Harcourt.”

In his remarks, Chief Executive Officer, Guaranty Trust Bank, Segun Agbaje, expressed the readiness of the bank to begin implementation of the mandate given by the CBN. Agbaje assured customers that the banks had the resources to fund the process, adding that they have collectively agreed to start immediately.

He also stated that different banks had different processes, therefore, banks should examine their controls, and what worked for them.

Agbaje said, “There is a lot of abuse around FX, so you will find out that some of the better controlled systems are centralised, while some are decentralised. Customers should not panic, there would be availability of forex, and the banks will run a very transparent process.”

CBN to Refund Pending Licencing Fees to BDC Promoters

CBN said it would immediately commence the refund of capital deposits and licencing fees, where applicable, to BDC promoters who had pending license applications with the bank. CBN in a circular to BDC promoters and all banks, dated July 29, 2021, and signed by the CBN Director, Financial Policy and Regulation Department, Mr. Ibrahim Tukur, advised the affected promoters to forward their requests for refund in writing to the Director, Financial Policy and Regulation Department.

It added that the requests should be accompanied with telex copy of initial deposit of N35 million and account details of the refund, which should be the same as the account from which the capital deposited originated, including bank name, account name and number, as well as copy of the bank draft/telex for payment of licensing fee of N1 million, if any.

CBN further directed all deposit money banks to henceforth stop accepting instructions from customers to transfer capital deposits of N35 million to the designated CBN account for the purpose of applying for BDC licenses.

Similarly, the banking sector regulator, in another circular, directed all banks to set up teller points at designated branches across the country to fulfil legitimate FX requests for Personal Travel Allowance (PTA), Business Travel Allowance (BTA), tuition fees, medical payments, and SMEs transactions, among others.

In the letter to all banks, signed by the Director, Banking Supervision Department, Mr. Haruna Mustafa, the bank explained that the directive was part of the fallouts of the MPC meeting, which had also authorised the commercial banks to begin accepting cash deposits of foreign exchange from their customers. The circular directed the banks to adequately publicise the locations of designated branches and make necessary arrangements to sell FX to customers in cash and/or electronically in compliance with extant regulations.

CBN strongly advised banks to ensure that no customer was turned back or refused FX, provided documentation and all other requirements were satisfied.

The apex bank further warned against undue delays, rationing and diversion of FX, and directed commercial banks to establish electronic applications and alert systems to update customers on the status of their FX requests. It reminded banks that a toll-free line had been set up at the apex bank to enable bank customers to escalate unresolved complaints related to their FX requests.

The statement added that the CBN would continue to closely monitor banks’ conduct and compliance with the directive in order to ensure an efficient FX market for all legitimate users, adding that any breach of the directive will be severely sanctioned.

ABCON to Engage CBN

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, yesterday said the association would engage the CBN to address the ban on FX sale to its members. Gwadabe said the planned engagement would, among other things, seek to identify and sanction earring BDCs.

In a statement, he clarified that the association was still providing FX services, in spite of the central bank’s action.

Gwadabe said the pronouncement by the CBN did not stop BDCs from providing FX services as allowed by their operating licences and in their operating guidelines.

Gwadabe said, “BDCs are licenced to provide retail FX services, including buying from the public and also selling to end-users for allowable transactions, namely, PTA, BTA, payment of medical, and school fees.”

He said while the CBN had stopped dollar sale to BDCs, it did not cancelled their operating licences, or ban them from providing FX services to members of the public.

According to him, “While the dollar sale from CBN had helped in enhancing supply, the fact remains that BDCs are empowered to source FX from other sources and also to provide various services to members of the public.

“At ABCON, we urge our members to see the CBN pronouncement as a wakeup call and opportunity to widen their customer base and deepen their business.

“ABCON has always worked with the CBN to ensure proper working of the FX market and in line with this principle, we will engage with the apex bank to address and resolve all the issues that led to the recent action, including identification and sanctioning of earring BDCs, where necessary.”

CBN: There’s No Going Back on Ban of FX Sale to BDCs

Contrary to insinuations that the CBN may withdraw its decision to end FX sale to BDCs, the regulator yesterday stressed that there was no going back on the matter. Director, Monetary Policy Department, CBN, Dr. Hassan Mahmud, said this on “Arise Xchange,” a programme monitored on Arise News Channel.

Mahmud said unlike the temporary ban of FX sale to BDCs in 2016, the central bank was taking a tougher stand this time. He said going forward, the bank would only supply the greenback to banks to meet genuine retail needs of Nigerians.

According to him, “This time around, there is going to be stricter monitoring and the banks themselves know what is on their shoulders now, looking at where we are coming from in terms of taking it off the BDC segment because of distortion and irregularities and arbitrages we saw in that market.

“So, the banks know that this is a more serious burden on them and it is something that has to do with their reputation and the fact that the CBN has enough tools within its purview to monitor those banks and also penalise those that fall off the line.”

Mahmud stated, “From the language the governor spoke for now, it is permanent. It is not a stopgap that after one month we would come to reverse. Even the BDCs applications that are under process, all that is going to stop and all funding of FX requirement should go to the commercial banks.”

He added that the policy would help curb arbitrage related to FX malpractices and improve transparency in the market.

Mahmud explained, “One big area that was a major issue is the behaviour in the BDC market. We got to a stage that you could not differentiate between the BDC market rate and the parallel market rate, whereas BDCs are supposed to be formal institutions licenced by the central bank with a licencing guideline with what to do.

“It was supposed to be the retail end to moderate prices at that level because of the shocks. We always regard that market as very little and insignificant so it is not going to really impact on the other parameters of the exchange rate.

“With time, we have come to see a lot of noise in that market and that has generated a lot of issues around the transparency and conduct of that market. There was a need for the CBN to come in to put things in perspective and allow the market system to operate in a very efficient manner.” (Courtesy, THISDAY)