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CBN forex ban, yes the banks are guilty but…..

Central Bank of Nigeria, CBN, has barred nine commercial banks from all foreign exchange transactions and operations due to their inability to remit

to the Treasury Single Account at CBN sum of $2.12billion belonging the Nigerian National Petroleum Corporation, NNPC.

The banks are:

1. UBA $530m

2. First Bank $469m

3. Diamond Bank $287m

4. Sterling Bank $269m

5. Sky Bank $221m

6. Fidelity $209m

7. Keystone Bank $139m

8. First City $125m

9. Heritage $85m

Note that banks are allowed by law to use part of customers’ deposits to create loans. That’s the key function of the banks worldwide.

Unfortunately, the banks had used part of these foreign deposits to book foreign currency loans for Nigerian customers especially in the power and oil and gas sectors before the decision by the FG to fast track the implementation of TSA policy.

The natural thing was for the banks involved to breathe down the neck of the borrowers to pay up even when the financed business have not started generating revenues to enable them to repay the banks so that banks can remit same to TSA.

Some of the loans are medium tenored and as such the economic cycle of the financed businesses cannot allow repayment within 6 months or 2 years . Also, the rating of the economy has reduced the capacity of the banks to get offshore banks to refinance the loans as was the case some few years back.

I need not add that the current economic climate has now made the best of the banks’ customers a financial liar. Many customers can’t genuinely service their loan obligations. 

They too are in recession.

In short, since borrowing customers have not repaid, the banks have not been able to remit to TSA. The banks can only remit the funds when the customers pay. That’s the truth except they succeed in their ongoing foreign refinancing arrangements.

The monies were not stolen or misappropriated. That’s why nobody has been arrested and nobody would be; though scapegoats must be made. It is our occupational hazard.

There are risk assets (or loans) to show for these unremitting foreign exchange deposits in question. They are not money lost but money delayed.

This is the reason why the Swiss banks couldn’t refund Nigeria the Abacha deposits (or loots) with them even with court orders. The deposits had been used to make loans in their economy prior to the mandatory order to repatriate the illicit funds to Nigeria. They can only remit to us as the investments of the bank borrowers repay. They are that shameless! But that is sound economics!

You can now see the down side of the TSA implementation with pronto?

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