- Meets bank execs, readmits UBA into FX market
- FirstBank moves to net off NNPC’s $500m exposure to bank
- Naira falls to $402/$1, investors offload banking shares
The Central Bank of Nigeria (CBN)
enforced the sanction imposed on banks that failed to return Nigerian
National Petroleum Corporation (NNPC)/Nigerian Liquefied Natural Gas
(NLNG) Company dollar deposits to the federal government’s Treasury
Single Account (TSA) by not selling dollars to them when it intervened
on the interbank foreign exchange market yesterday.
The CBN on Tuesday barred nine banks from participating in the FX market for not remitting a total of $2.334 billion to the TSA.
The affected banks were the United Bank
for Africa (UBA) Plc – $530 million, First Bank of Nigeria (FBN) Ltd. –
$469 million, Diamond Bank Plc – $287 million, Sterling Bank Plc – $269
million, Skye Bank Plc — $221 million, Fidelity Bank Plc – $209 million,
Keystone Bank Ltd. – $139 million, First City Monument Bank (FCMB) Ltd.
– $125 million, and Heritage Bank Limited – $85.5 million.
The nine banks still face the prospect
of further financial fines, which shall be communicated to them by the
CBN in the coming days.
However, having complied with the CBN
directive, as exclusively reported by THISDAY yesterday, UBA was
readmitted into the FX market, effective today.
UBA, in a statement yesterday, confirmed
that the CBN had readmitted it into the FX market following its
remittance of all NNPC/NLNG dollar deposits. The bank thanked the public
for its continued support and patronage.
The CBN also confirmed it had readmitted UBA into the forex market effective today.
The central bank, in a statement signed
by its Director, Banking Supervision, Mrs. Tokunbo Martin, explained
that further to its directive that banks should return all outstanding
unremmited NNPC/NLNG dollar deposits, UBA remitted the deposits in its
possession to NNPC’s TSA account at the CBN.
“Accordingly, UBA has been readmitted into the forex market effective Thursday, August 25, 2016,” CBN said.
Naira Plummets
The interbank FX market opened yesterday
with no deals, until three minutes before the end of the session, when
the central bank intervened with dollar sales. But it did not sell
dollars to the affected banks, a banking source disclosed yesterday.
The affected banks have also been barred from buying dollars from autonomous market sources until the ban is lifted.
The news of the sanction affected the
performance of the naira yesterday as it depreciated to N315.93 to the
dollar, lower than the $305.50 from the previous day.
On the parallel market, the naira also fell to N402 yesterday, compared to the N397 to the dollar from the previous day.
Owing to the ban placed on the eight
banks, THISDAY learnt that there was a meeting between bank executives
and central bank officials in Lagos yesterday.
A separate meeting is expected to take place in Abuja today, a source revealed.
Banks Douse Concerns
In its reaction to the suspension from
the FX market, FirstBank, in a statement yesterday, explained that it
was in compliance with the TSA policy requirements, in line with the
federal government’s directive and continues to remit funds received as
and when due.
“It is pertinent to state here that the
referenced NNPC dollar accounts are fully disclosed to the CBN and are
being operated in line with the regulatory requirements, whilst
tripartite documented discussions have been ongoing between the CBN,
NNPC and the bank on the need for domestic retention of those balances
as part of measures to ameliorate challenges posed by the lack of FX
availability, and customers inability to source FX to fund their trade
finance obligations to the bank.
“We are confident in our ability to meet
and honour all our obligations as and when due and are currently in
talks with the CBN and other relevant bodies and are positive of an
amicable resolution soonest,” FirstBank added.
A top official with FirstBank also
informed THISDAY that the bank was confident that it would be readmitted
into the FX market before the end of this week, because it had asked
the central bank to net off NNPC’s exposure to FirstBank against the
corporation’s dollar deposits left with it.
He said: “NNPC took a loan from us
amounting to about $500 million, so when this is netted off against its
dollar deposit of $469 million, we would have complied with the CBN’s
directive.
“It would also mean that NNPC will now
be indebted to FirstBank. We have been in touch with NNPC and CBN on
netting off NNPC’s exposure to us, so we are confident that we should be
readmitted to the market within the next few days.”
He also allayed fears of the bank’s
ability to meet coupon payments on its two Eurobond issues, stating:
“Yes, we have two Eurobonds, one is for $300 million with a coupon rate
of 8 per cent per annum and will mature in 2020, but is callable in
2018, and the other one is the $450 million Eurobond with a coupon rate
of 8¼ per cent, maturing in 2021 and is callable in 2019.
“The coupon payments on both Eurobond
issues amounts to about $37 million per annum and the bank has the
capacity to meet these payments when they fall due. We also still have
more than a year before the first Eurobond is callable, so there should
be no concerns about the refund of NNPC funds to the TSA.”
Diamond Bank also reassured its
customers of enhanced quality service delivery and commitment to meet
its banking obligations despite the decision by the CBN.
The bank insisted that as a financial
institution built on a foundation of sound corporate governance, full
disclosure of the outstanding TSA funds was made to the CBN.
“We are currently engaging with relevant
stakeholders, with the support of the regulator, to resolve this
industry-wide issue quickly. Our primary responsibility is to our
customers. This development does not affect customers’ own deposits,
both local and those in foreign currencies.
“It also means that services such as
payments – local and international, will go through as normal whenever
our customers need to make them.
“Remittance services will continue as
normal and customers can transact anywhere in the world, any time of the
day, on their mobile application or internet banking,” Diamond Bank
added.
FCMB, in an e-mail to its customers,
said as a financial institution with strong corporate governance rules,
it had always fully disclosed the outstanding TSA funds on its books and
has continued to work assiduously to fulfill its obligations.
According to FCMB, members of the NNPC management team were kept fully in the picture on the funds.
“This scenario is really because of lack
of foreign exchange availability and the prevailing fall in oil prices
rather than non-compliance by FCMB. It is actually a widespread industry
issue. We also think it is very important to proactively reach out to
our customers and explain what this means for them, and hence, this mail
for you.
“This development will have no impact on
most of our customers. While there might be minimal impact on the
establishment of new lines of trade through the foreign exchange market,
your relationship officer will be able to provide guidance on this.
“This scenario will not affect your
deposits, both local and those in foreign currency. Transactional
services such as payments, local and international will continue
seamlessly wherever and whenever they are initiated.
“We have started to execute a strategy
to ensure a rapid and mutually beneficial outcome of this situation. We
fully understand the importance of unfettered access to the FX market
and its link to growth for the country’s economy.
“Across all spheres of banking, the onus
is on us to ensure that we continue to meet your financial needs,
whatever they might be,” the bank said.
Keystone Bank assured its customers that
it always made full disclosure of outstanding TSA funds, and had at
various times diligently engaged the CBN and relevant stakeholders for
resolutions to enable it fulfill the TSA obligations in the face of
challenging market conditions.
“All our efforts are geared towards a
very timely resolution as we understand the importance of sourcing
foreign exchange for our customers’ needs to support economic growth.
“Note, however, that this development
does not adversely affect your existing transactions with us, except
that there will be constraints in establishing new letters of credit
until the issue is resolved.
“We enjoin you, therefore, to continue
to patronise Keystone as we remain committed to rendering exceptional
service on all our other banking products including best rates on
deposits, visa card products, electronic banking and mobile banking
transfers, etc,” it added in a statement last night.
Sterling Bank, in its statement,
rejected the suggestion that it failed or neglected to disclose at any
time, any sum held on behalf of its clients to the regulatory
authorities, saying the funds were fully captured in the relevant
regulatory returns.
“In actual fact, the bank affirms that
it went beyond this basic requirement of disclosure and reporting to
holding several meetings with the parties involved.
“While the current situation is a
broader sector issue arising from the foreign currency illiquidity in
the domestic banking sector, Sterling Bank continues to work with its
client and the banking regulator to resolve the situation in the
shortest possible time.
“We would like to restate that the bank
at all times reported the balances involved to the central bank and at
no time concealed or refused to remit the funds as documented in several
written correspondences.
“Arising from our continuing efforts in
this regard, we have reduced the outstanding sum to the current level
within a very short period.
“As an institution built on the core
values of integrity and sound corporate governance, Sterling Bank has
always complied with all regulatory and other operating requirements and
the TSA regulation is no exception to this proud record.
“We take this opportunity to thank all
those who have reached out to us with goodwill messages for your
understanding and continue to count on your support as we work with the
larger banking sector to resolve this matter in the shortest possible
time,” the bank’s management said yesterday.
Banking Stocks Nosedive
But as the banks allayed the concerns of
their customers, shareholders and other stakeholders, the shares of
seven of the nine banks barred from the FX market took a bashing on the
stock market yesterday as investors reacted negatively to the sanction.
Of the nine banks barred from the
market, seven are listed on the Nigerian Stock Exchange (NSE) and at the
close of trading yesterday all seven witnessed a decline in their share
prices as investor sentiments turned negative.
Diamond Bank recorded the highest
decline of 8.9 per cent, falling from N1.24 to N1.12. FCMB followed with
a decline of 5.0 per cent to N1.14, from its opening price of N1.20.
UBA shed 2.9 per cent, sliding from
N4.53 to N4.46 per share. Skye Bank went down by 1.5 per cent to close
at N0.64, against its opening price of N0.65.
Fidelity Bank fell by 0.9 per cent to N1.00 per share, just as FBN Holdings fell by 0.3 per cent to end the day at N3.16.
Contrary to expectations that the
decline would drag down the market, a late rally by Guaranty Trust Bank
Plc, Ecobank Transnational Incorporated and Union Bank of Nigeria Plc
lifted the NSE Banking Index to close higher by 0.2 per cent.
Also gains by Dangote Cement Plc, the
most capitalised stock on the Nigerian bourse, Nigerian Breweries Plc,
Oando Plc and Forte Oil Plc lifted the benchmark index (NSE All-Share
Index) by 0.25 per cent to 27,880.46, compared with the marginal decline
of 0.1 per cent on the previous day. Market capitalisation also added
N24 billion to close at N9.55 trillionCulled from Thisday
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