Nigeria: Three banks face sanctions over forex scam
The Central Bank (CBN) will, this week, withdraw the foreign exchange authorised dealership of three banks and suspend them from the foreign exchange market for three months for engaging in foreign exchange speculation.
Meanwhile, foreign exchange demand at the official foreign exchange market rose by 351 per cent even as the naira depreciated by 400 kobo at the parallel foreign exchange market.
Vanguard was reliably informed that the banks (names withheld) were found to be buying foreign exchange at the Wholesale Dutch Auction System (WDAS) for the purpose of speculation.
A reliable source told Vanguard that investigation by the CBN revealed that each of the banks bought about $200 million thrice. These purchases, it was discovered, were not based on genuine demand but were warehoused in anticipation of further depreciation of the naira.
It would be recalled that in 2001, the CBN suspended 21 banks from the foreign exchange market for various foreign exchange malpractices, especially round-tripping. The banks were suspended for one year and were forced to pay the amount of profit made from the illegal practice.
Meanwhile, demand for foreign exchange in the official market has risen more than threefold since the introduction of WDAS on July 13.
Analysis of the foreign exchange demand and sales in the six auctions conducted by the CBN before and after the introduction of WDAS shows demand for foreign exchange shot up by 351 per cent to $3.16 billion from $861.8 million.
Total amount sold also rose by 56 per cent to $1.19 billion from $764 million. Average demand per auction session went up by 313 per cent to $526.7 million from $127.4 million, while average sales rose by 38 per cent to $198.4 million from $143.6 million.
This rise in demand occasioned persistent depreciation of the naira in the official market. Prior to the WDAS, the exchange rate was N146. Hence with the increase to N149.75 , weekend the naira has depreciated by 375 kobo under WDAS. At the inter-bank market the naira depreciated by 866 kobo as N156.84 exchanged for one dollar last week as against N148.17 at the beginning of the month.
Last week, the naira lost 400 kobo to the dollar at the parallel market as the exchange rate rose to N158 per dollar from N154 per dollar.
Parallel market operators said that the rise was prompted by the depreciation of the naira in the official and inter-bank segment of the market.
They said since they also purchase dollar from the banks, the rate at which the banks sold to them was higher than the N154 per dollar in the market at the beginning of the week hence they adjusted their rate accordingly.