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CBN slams N2b fine on Standard Chartered Bank for forex infraction

By The Rainbow
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The Central Bank of Nigeria (CBN) has slammed a N2billion fine on Standard Chartered Bank for foreign exchange infraction.

The bank reportedly bought  $25million at the official rate and sold it   way above the inter-bank market rate.

According to a report by This Day, the apex bank has in addition the commercial bank's treasurer  for allow such arbitrage practice.

CBN has in recent times taken a rash of actions targeted at reining  unwholesome banking industry practises that have engendered a huge differential between the inter-bank and parallel market rates.

As part of its efforts to bridge the wide gap between the interbank and the Bureau De Change (BDC) segments of the foreign exchange (FX) market, the apex bank, the State Security Service (SSS), the Nigeria Police Force (NPF) and the Bureau De Change Operators (BDCs) also met yesterday over the need for the BDCs to adhere to the rules governing foreign exchange transactions.

A reliable source, who attended the closed-door meeting, said the federal government was concerned about the disparity in the FX rate among the three markets.

According to the source, the CBN and the security agencies present at the meeting made the BDC operators to understand that a lot of foreign investors are not comfortable with the wide gap between the three arms of the FX market and would only come in if the situation is addressed.

Therefore, it is anticipated that the initiative would encourage the inflow of FX from foreign portfolio investors.

Mr. Aminu Gwadabe, president, Association of Bureau De Change Operators of Nigeria (ABCON),  who confirmed the development in a phone interview yesterday, said his members had pledged to cooperate with the government.

He explained: “We were told to follow the rules and make sure we cooperate with them. We have agreed to carry our members along on that, in ensuring that compliance is strictly observed. We have been sensitising our members and we have been holding meetings.

“We want to have same regulation that is happening within the banking industry for BDCs. If you go to any bank, you see the FX rates written boldly. So, we have promised the government that we would adhere to the rules. So, we are looking at a rate between N390/$ and N400/$. That is, we buy at N390/$ and sell at N400 to retail customers.”

He said the initiative was to make the parallel market unattractive.

“We already have a Rate Regulation Committee and we have an Enforcement and Surveillance Committee as well as a Sensitisation Committee. So, our business is now under strict surveillance by the security agencies and we have to protect it,” the ABCON president added.

THISDAY, however, learnt last night that some BDC operators who were caught selling FX above the stipulated limit were arrested by security agencies, both in Lagos and Abuja.

Those arrested would be prosecuted in order to discourage others from flouting the FX regulations as well as the federal government's objective.

A top executive of ABCON, who said he was not aware of the arrest, declined to comment on the exact number of BDC operators arrested.

Meanwhile, the naira reacted positively to the development on the parallel market as it appreciated to N460 to the dollar yesterday, stronger than the N465 to the dollar it closed the previous say.

On the interbank FX market, the spot rate of the naira closed at N307.76 to the dollar yesterday, just as it went for N385 to the dollar on the BDC segment.

In a related development, the stock market reacted negatively to the news of Donald Trump's election as US president. Specifically, the Nigerian Stock Exchange (NSE) All-Share Index (ASI) fell by 0.72 per cent to 26,173.69, while market capitalisation shed N65.6 billion to close at N9.0 trillion.

Although the market has been bearish in the past six trading days, operators said the surprising victory of Trump must have further dampened investors' confidence.

“We acknowledge the possibility that the surprise victory of Trump in the US presidential election could potentially further dampen sentiments, as investors weigh the potential impact on the country given the close trade relationship between Nigeria and the US,” analysts at Meristem Securities Limited said.

The global markets were calm as the S&P 500, Dow Jones, and Nasdaq stock indexes in the US were little changed after the first hour of trading.

The pre-open future markets forecast dramatic sell-offs when Trump's lead became clear overnight.