Nigerian Banks Expose Clients with Suspicious Dollar Transactions

 Nigerian Banks Expose Clients with Suspicious Dollar Transactions

In line with the resolve of the Central Bank of Nigeria (CBN) to halt a regime of arbitrage in the foreign exchange market, some Nigerian banks have started exposing the identities of customers, who allegedly obtained dollars by false pretence, and traded them at a profit in the parallel market.

This is coming as the aggregate broad money supply, M3 Money, which represents the amount of money circulating in the economy, rose to N44.56 trillion in January, representing a 1.70 per cent growth year-to-date, a report by the CBN, has shown.

Some bank customers have been taking advantage of the lucrative 37 per cent differential between the official and black market exchange rates by obtaining the dollar at the official rate of about N416, only to subsequently sell in the unauthorised market at a more expensive average rate of about N570.

These customers can beat regulations by presenting false travel documents, prompting the apex bank to direct banks to notify their customers of an impending crackdown on saboteurs in the forex market.

However, a report by Bloomberg on Saturday revealed that some banks have begun to implement the CBN’s directives by publishing the names of clients found to have filed suspicious claims for forex transactions on their websites last week.

For instance, Zenith Bank Plc, the nation’s biggest lender by market value, has published 987 names of customers engaging in the illegal practice on its website, Fidelity Bank Plc identified 83 customers; First City Monument Bank Plc listed eight names so far, while Wema Bank published one name. The list of banks that complied also included the United Bank for Africa Plc.

The apex bank had directed banks to identify such customers and ensure they refund the hard currency. The regulator first alerted banks of the ongoing practice last year.

The CBN had said: “Consequently, further to the various measures already put in place, all banks are hereby directed to publish on their websites the names and BVN of defaulting customers who present fake travel documents or cancel their tickets and fail to return the purchased PTA/BTA within two weeks as stipulated in the customer declaration form signed by them.”

Some deposit money banks acting on the directive of the CBN had sent notices to their customers warning that identities and Bank Verification Number (BVN) of those who contravene the apex bank’s new forex policy on overseas personal and business travels would be published.

The CBN had also directed that travellers who buy foreign exchange from banks for travel purposes but fail to embark on the trip after two weeks of their scheduled travel date must return the forex to the banks.

The banks in their notices also pointed out consequences for those customers who engage in fraudulent and unethical practices with regards to the purchase of Personal Travel Allowances (PTA) and Business Travel Allowances (BTA).

In its notice to customers, one of the Tier 1 banks had said: “We have been directed by the Central Bank of Nigeria to inform all our customers that unethical practices to circumvent the new CBN policy on the sale of forex, such as the presentation of false travel documents, visas, and the cancellation of flight tickets, after purchasing personal travel allowance and business travel allowance, will no longer be tolerated.

“Defaulting customers who present fraudulent travel credentials or cancel their tickets and fail to refund the purchased PTA and BTA within two weeks, as stated in the signed customer declaration form, will have their identities and bank verification numbers published.

“We aim to implement this policy immediately as an organisation that is fully compliant with the Central Bank of Nigeria’s rules and regulations.

“Our bank is committed to partnering with the CBN to ensure a transparent, efficient and stable FX Market that meets the needs of all legitimate users.”

Meanwhile, the aggregate broad money supply, M3 Money, which represents the amount of money circulating in the economy, rose to N44.56 trillion in January, representing a 1.70 per cent growth year-to-date, a report by the CBN, has shown.

A recently released Depository Corporations Survey by the apex bank, quoted by Cowry Asset Management Limited, showed that the growth was driven by a 1.46 per cent increase in M2 to N44.46 trillion and a sharp increase in CBN bills to N107.38 billion, from N100 million in the preceding month) amid efforts to rein in surplus liquidity.

M2 is a measure of the money supply that includes cash, checking deposits, and is easily convertible near money

However, analysts from Cowry Asset Management Limited noted that the growth in central bank bills also came with its cost implications, as well as increased indebtedness of the apex bank.

According to the latest edition of Cowry Financial Markets Review, Outlook & Recommended Stocks, growth in Broad Money supply was on the back of increases in Quasi Money (consisting of time deposits, near-maturing securities, foreign currencies, etc) and Narrow Money or M1 Money (comprising demand deposits and currency outside banks) by 0.34 per cent and 3.03 per cent to N25.74 trillion and N18.72 trillion, respectively.

“Increases in quasi money may not be unconnected to, among other things, growing appetite of pension funds administrators to place retirement savings with commercial banks at relatively attractive interest rates. “As reported in the February 11, 2022 edition of our CWR, we observed that money moved out of T-bills securities to Local Money Market Securities (LMMS), especially bank placements,” the report stated.

It noted that the total funds invested in this investment category rose by 20.04 per cent to N2.03 trillion in December 2021 (lifting its share of the total assets to 15.09 per cent), from N1.69 trillion in December 2020 (or 13.71 per cent of total assets).

The CBN document was quoted as saying that that Reserve Money rose by 2.36 per cent to N13.61 trillion as bank reserves with the Central Bank increased by 3.51 per cent to N10.32 trillion (partly in tandem with increased deposits at the banks), to partly offset by a 5.52 per cent decline in currency outside banks to N2.78 trillion.

On the asset side, Net Domestic Credit grew by 2.49 per cent to N49.73 trillion as Credit to the Private Sector upped by 0.73 per cent to N35.45 trillion while Credit to the Government increased by 7.13 per cent to N14.28 trillion. However, Net Foreign Assets moderated by 1.79 per cent amid pressures on Nigeria’s foreign sector.

Meanwhile, Cowry Assets analysts have warned that the rise in the Narrow Money without a faster rise in GDP may result in higher inflation in 2022.

It noted that in 2021, the velocity of Narrow Money moderated to 10.16 times from 11.49 times in the preceding year even though Narrow Money rose by 14 per cent over the period, saying the productivity of the country needs a lot of improvement going forward.

The report warned that the escalation of hostilities between Russia and Ukraine and the attendant instability in the global oil market will exert pressure on the nation’s external reserves.

It said: “Meanwhile, in the wake of the Russian Invasion of Ukraine, we are concerned that Nigeria would not optimally benefit from any ensuing rise in crude oil prices due to its suboptimal crude oil production. This would increase pressure on the external reserves as well as exchange rates as oil dollar revenues, its primary foreign currency earner, would struggle to meet the higher cost of imported refined products in addition to other imports.”

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