The Central Bank of Nigeria (CBN) has lifted a suspension of nine banks from foreign exchange trading for failing to remit some oil money to the government, an official said Thursday. "The erring banks have been readmitted into the interbank foreign exchange market after they presented their plans to pay back the money," the CBN official told AFP.
The CBN suspended the nine banks last week for withholding $2.12 billion belonging to the Nigerian National Petroleum Corporation (NNPC) and the Nigeria Liquefied Natural Gas (NLNG) contrary to a government regulation. On coming to power in May last year on an anti-graft ticket, President Mohammadu Buhari ordered all government revenues to be paid into Treasury Single Account (TSA) at the CBN to prevent fraud. While government agencies and ministries previously maintained multiple accounts at local banks, Buhari instituted the TSA to ensure that all government funds were pooled. The decision was to instill more accountability in monitoring government revenue and to eliminate opacity in government.
Last week's ban created tension in the financial system, triggering a crash in the stocks of most of the indicted lenders on the Nigeria Stock Exchange. The foreign exchange market also reacted negatively with the naira currency slumping further on the parallel market to close at 420 to the dollar on Wednesday against 396 before the suspension. Industry experts had appealed for leniency to avoid causing a run on the banks.
"We should not kill an ant with a sledge-hammer. Banning nine banks from the forex market at this time of recession will worsen the situation," Pascal Odibo at Jeff & O'Brien said. He warned that the ban would deny importers and forex users the opportunity to obtain forex through the banks under scrutiny, ramping up pressure on the black market.
One of the indicted banks, the United Bank for Africa (UBA) was reinstated a day after the suspension once it remitted its own share of the held funds. Nigeria's oil-dependent economy is in recession because of low oil prices and resulting foreign currency shortages, hammering government revenue and pushing inflation to 17.1 percent in July.
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