By Amechi Ogbonna
The refusal of commercial banks to sell $50,000 weekly from the Diaspora remittances to Bureaux De Change (BDCs) as mandated by the Central Bank of Nigeria (CBN), leaves a sour taste in the mouth of stakeholders. This is coming after nine banks were recently accused by the CBN of breaching the Treasury Single Account (TSA) rule while round-tripping allegations have been leveled against several other lenders.
These developments have left stakeholders with no option than to call on the CBN to outsource the weekly dollar sales from the Diaspora funds to independent agencies that can obey its directives.
The Bureau de Change (BDC) operators are a critical stakeholders in Nigeria’s quest to achieve stability in the foreign exchange (forex) market.
It was in consideration of their role in achieving exchange rate stability and making forex available to the retail end of the market, that the Central Bank of Nigeria (CBN) recently directed commercial banks to sell $50,000 Diaspora-related forex on weekly basis to nearly 3,000 BDC operators.
The World Bank Migration and Remittances Factbook 2016, for instance, showed that Nigerians living abroad sent home $21 billion annually. The figure, it said, is by far the largest volume of remittances to any country in Africa and the sixth largest in the world. The funds are still being warehoused by banks at a time supplies have dried up in several critical sectors.
However, recent happenings have questioned the reluctance of banks to disburse Diaspora remittances estimated at $21 billion annually to BDCs as instructed by the apex bank.
From all indictions, the indictment of nine banks by the CBN for refusing to remit $2.274 billion belonging to the Nigeria National Petroleum Corporation (NNPC)/ Nigeria LNG into the Treasury Single Accounts (TSA) as required by regulation is disturbing.
CBN’s consistent complaints that the banks are violating international money transfer rules, establishing private and company accounts to harvest dollar inflows from abroad without following the right Know Your Customer (KYC) requirements also need to be investigated.
Already Nigerian banks have been accused by the CBN of engaging in round-tripping, taking advantage of the huge forex gaps between the official and parallel markets to make a fortune.
Also, banks resistance to CBN’s directive to sell $50,000 weekly from Diaspora remittances to BDCs. The banks refused to obey the order despite several pleas by the apex bank that they disburse the funds to the BDC operators to boost liquidity in the forex market.
Commenting these developments, President, Association of Bureau De Change Operators of Nigeria (ABCON) Alhaji Aminu Gwadabe, said only 10 per cent of BDCs in the Lagos market have so far accessed dollar from banks since the CBN gave the directive nearly a month ago.
“The proceeds of the international money transfer funds are not CBN money and not from its foreign reserves. This is money that Nigerians in Diaspora, are sending into the economy. Before now such money came through unofficial means, some sending through hands, and at the end of the day, the beneficiary will not even get it. But in other countries, the Diaspora funds are strictly for BDCs,” Gwadabe explained.
The ABCON boss is urging the CBN to outsource the dollar distribution role to independent distributor since the banks have failed in their assigned role. The banks that are so far involved in the dollar sales to BDCs include FirstBank, Ecobank Nigeria, Fidelity Bank, United Bank for Africa and Unity Bank. Others are Diamond Bank, Zenith Bank and Stanbic IBTC Bank.
Gwadabe disclosed that BDCs in Port Harcourt, Kano, Abuja, Onitsha, Maiduguri, Benin and Enugu are yet to get a single dollar from these banks. The ABCON chief said that the banks are also selling dollar far above the interbank rate. The banks, he added, are supposed to sell to the BDCs on the same day within the week, but have failed to do so. “Instead of staggering the payment, the banks should sell to the BDCs on the same week day, so that the impact will be felt in the market,” he said.
“Our members across the country have funded their accounts but the banks are not selling to them. The BDCs that met the CBN’s policy guidelines on the disbursement and cleared by the banks have still not received a dime from the banks,” he added.
“I think the banks are compromising the policy and CBN’s directive on the matter. And like I said earlier, since the banks are not co-operating, I expect the CBN to take that role from them and assign it to a reputable independent distributor,” he advised.
Only recently, the CBN Acting Director, Trade & Exchange, W.D. Gotring, had directed through a circular to authorised dealers that all agents to approved IMTOs sell $50,000 weekly foreign currency accruing from inward money remittances to licensed BDCs. The directive was meant to ensure stability of the exchange rate and encourage participation of critical stakeholders in the foreign exchange market.
Gotring, in another circular to authorised dealers titled: Re: Transactions in ‘Free Funds’ by Authorised Dealers, also accused the banks of buying and selling forex without following stipulated guidelines. “The CBN has noticed that some Authorised Dealers have continued to buy and sell foreign exchange referred to as ‘free funds’ despite the provision of the circular of March 4, 2004 on the subject,” he said.
He reiterated that as provided in the laws and regulations governing dealings in forex, authorised dealers shall not sell forex without appropriate documentation and disclosure to the regulatory authorities irrespective of the source of the funds.
“Accordingly, authorised dealers shall deal in eligible transactions only, and not to engage in any foreign exchange transactions on terms inconsistent with the extant laws and or regulations,” he said.
More regulatory violations by banks
The CBN has also accused commercial banks of compromise in the ways they handle proceeds from international money transfer inflows into the country. A circular to banks titled: Illicit International Money Remittances through the Banking System, and signed by Gotring, accused the lenders of opening multiple illegal companies and personal accounts where they harvest dollar proceeds for onward disbursements to recipients in Nigeria.
The practice, he said, is against guidelines for the operation of International Money Transfer Service (IMTS) in Nigeria of September 26, 2014, warning the lenders to desist from such unwholesome practices.
“Further to the guidelines for the operation of International Money Transfer Service (IMTS) in Nigeria of September 26, 2014, we have observed that some Deposit Money Banks (DMBs) are operating accounts either as companies or companies masking themselves as individuals for the purpose of illegally receiving money transfer flows into the accounts for onward disbursements to recipients in Nigeria,” he said.
The CBN acting director therefore ordered the lenders to conduct Know Your Customer’s Business (KYCB) checks on all their customers to ensure that they do not transact in illegal/illicit flows and also freeze compromised/ identified defaulting accounts.
CBN licenses 11 IMTOs
To remove oligopoly in the money transfer business, CBN has equally licensed 11 new IMTOs to join Western Union, MoneyGram and Ria, which were previously cleared by the apex bank.
Gwadabe has praised the CBN’s decision, describing it as a right step in the right direction and inline with ABCON’s campaign that new operators be allowed into the market.
The new entrants are Trans-Fast Remittance LLC; WorldRemit Limited, UAE Exchange Centre LLC; Wari Limited, Homesend S.C.R.L, Small World Financial Services Group Limited and Weblink International Limited. Others are Cash Pot Limited, DT&T Corporation Limited, Fiem Group LLC DBA Ping Express and CP Express Limited.
CBN Acting Director, Corporate Communications, Isaac Okorafor, said the new entrants was in line with the ape bank’s efforts to liberalise the forex market, ensure liquidity and make forex more readily available to low end users.
TSA breaches by banks
Although the nine commercial banks barred by the CBN from the interbank forex market have been readmitted, an analysts at Lagos-based CSL Stockbrokers Limited predicted they may suffer about N50 million fine each.
Former Executive Director, Keystone Bank, Richard Obire said: “The CBN may want to demonstrate to the banks that it took their offences very seriously and make it painful to them. The regulator may want to make the fines painful to them, as a deterrent to others. I see not less than N50 million fines on each of the affected banks, and that’s N450 million in all,” he predicted.
Obire said although the banks are already facing hard times, but letting them go without a fine, could provide a wrong precedence for the industry.
BDCs as engine block of economy
For Gwadabe, Nigeria BDCs can be strengthened to meet the forex demand at the retail end of the market so that they can continue to enhance employment generation in the country.
The ABCON boss believes that despite the challenges facing the economy, the CBN and BDCs can work together and find sustainable solutions that can help the country wriggle out of the ongoing forex crisis and achieve full economic recovery.
Besides, ABCON has reached the final stage of automation of BDCs’ operations in Nigeria, and is seeking for CBN’s certificate of no-objection on the project. Gwadabe said the automation plan has been received by the CBN adding that a comprehensive reforms of the BDCs has already been unveiled earlier in the year.
ABCON under Gwadabe has also pledged to ensure that purchased funds would be disbursed to end users and for eligible transactions only and shall render weekly returns on purchases from the banks to Trade and Exchange Department of the CBN. He further promised to ensure strict compliance to the provisions of the anti-money laundering laws observance of appropriate KYC principles in the handling of forex transactions.