THE recent decision of the Central Bank of Nigeria (CBN) to restrict nine commercial banks from the foreign exchange market for flouting its directive to remit $2.3 billion belonging to the Federal Government into the Treasury Single Account (TSA) sent shock waves across the banking sector. The sum in question is revenue which accrued to the Federal Government from the Nigerian National Petroleum Corporation (NNPC) and the Nigeria Liquefied Natural Gas (NLNG).
Although the CBN eventually lifted the restriction some days later, following proposals from the affected banks on how they would remit the outstanding sum, we must not gloss over the lessons of the incident. First, is that the failure of the banks to heed the directive of the banking regulator was, in the first place, an act of impunity that should not be tolerated. It is, therefore, apposite that the banks have now retraced their steps and made plans for the remittance of the money.
While the rift between the CBN and the banks lasted, several allegations were made against the apex bank. The commercial banks attributed their failure to remit the funds to the fact that the CBN, itself, owed them $3bn in unfunded Letters of Credit (LCs) since last year. Only $1bn of the sum was said to have been paid. They also pleaded that their payment of such a huge sum would affect their stability. These are not credible excuses as the money in question was not theirs in the first place. They, therefore, ought not to have held onto it to either artificially shore up their liquidity, or force the CBN to pay up.
The fact that the CBN owes them money is not a sufficient reason to withhold funds due to the TSA. Even if the CBN owes them as alleged, it would be wrong to hold onto government funds, as two wrongs do not make a right.
We are, however, glad that this rift has been resolved and bank customers can rest from fears of instability and a possible failure of the banks. Few hours after the CBN sanction took effect last week, shares of the affected banks reportedly plunged at the Nigerian Stock Exchange (NSE).
We are happy about the quick resolution of this matter and hope that all parties have learnt lessons on the need to avoid a recurrence of this situation. The controversy is a distraction to the mounting challenges facing the economy, which require all hands on deck. The situation in which commercial banks publicly joined issues with the banking regulatory authority is also most unhealthy.
Undoubtedly, this situation may not be unconnected with the broader issue of forex illiquidity in the domestic sector, which has seen the naira in a free-fall in recent months. We are also aware of the impact of the implementation of the TSA on the deposits of the banks, as public sector funds belonging to Ministries, Departments and Agencies (MDAs) of government in the banks were remitted to the TSA at the CBN.
The free-fall in the share prices of the affected banks was a timely warning. It gave a glimpse of the impact that the CBN sanction would have had on the banks and the economy which is already in recession, if it had not been lifted. The sanction would have badly affected the banks, their customers, the NSE and the general economy, as banking stocks constitute about 60 percent of total equities listed on the Stock Exchange.
The CBN cannot, however, be absolved of blame if, indeed, it owes the banks $2bn in unfunded Letters of Credit. If this is truly the case, it should expedite the payment of the sum.
Now that this dispute has been resolved, we urge all parties to it to abide by the terms of the agreement. The banks, henceforth, should not withhold sums due to the TSA for any reason. And the CBN should not unduly withhold sums due to the banks on Letters of Credit. The Federal Government should also put measures in place to ameliorate the challenges posed by the current shortage of forex.
We advise the CBN to give the banks the time they need to remit the money in question so as not to destabilise them. This has become necessary because of the current shortage of dollars in the country. The CBN must be mindful of the need to maintain the stability of the banks.