TSA: CBN Enforces Sanction, Shuns Nine Banks in Dollar Sales

• 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

Obinna Chima

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 trillion.