Central Bank of Nigeria (CBN) directing Deposit Money Banks (DMBs) to open teller points for retail FX transactions as well as electronic display boards in their banking halls, or risk sanctions expired Friday, will the apex bank bare its fangs on defaulting banks? Ndubuisi Francis asks

 

The Central Bank of Nigeria (CBN) had on March 3, 2017 issued a directive to banks, instructing them to, among other things, open teller points for retail forex transactions and to have electronic display boards in all their branches, showing rates of all trading currencies.

The CBN had said the directive was a reaffirmation of its willingness, capability and determination to meet foreign exchange demand in the market.

Over six months after the directive was issued by the apex bank, compliance appeared to have been largely observed in the breach, prompting the CBN to come up with a four-week ultimatum and threat of sanctions for likely offenders.

A circular issued by the CBN warned that it would mete out stiff regulatory sanctions to banks that fail to comply fully with the directive by October 13, 2017.

The circular signed by the Director, Banking Supervision, Ahmad Abdullahi, stressed that the bank would bar erring DMBs from all future CBN foreign exchange interventions, at the expiration of the ultimatum.

In March when it directed banks and authorised dealers to open teller points for retail FX transactions (PTA/BTA and SME), including buying and selling, in all locations in order to ensure access to foreign exchange by their customers and other users, without any hindrance, the apex bank did not come up with threat of any sanctions.

However, poor compliance by banks elicited CBN’s recent ultimatum, which ended on Friday.

A visit to a number of banks in Abuja, to assess the level of compliance to the directive, showed that most of them had already created special points for forex transactions as well as electronic display boards to show current FX rates.

However, banks’ branches visited around AYA in the Asokoro area of Abuja showed that although most of them had electronic monitors for rates, some posted insufficient information on the rates.

For instance, while some of them displayed only their selling rates, there was no information on the buying rates, just as others displayed the rate they buy and not selling rate.

THISDAY further observed that most of the banking halls visited had only a few customers conducting FX transactions.

Reacting to the CBN directive, Associate Professor of Finance and Head of Deparyment (HOD), Department of Banking and Finance, Nasarawa State University, Keffi, Dr. Uche Uwaleke, said the apex bank’s move was in order.

He recalled that the essence of the directive to open teller points for retail FX transactions as well as electronic display boards in their banking halls was to ensure thát end-users have access to FX.

“Of course, the reason for CBN’s directive is to ensure access to forex. There’s no doubt that there is improved liquidity since April due to accretion in the foreign reserves.

“ Unfortunately, the banks are not helping matters. Having a number of teller points will improve access and reduce complaints by costumers, who find it difficult to access forex,” Uwaleke said.

He recalled that the CBN first issued the directive in March but was largely ignored by the banks.

Uwaleke said he was fully in support of the CBN visiting sanctions on errant banks at the end of the ultimatum, noting it was not enough to talk tough.

He said the CBN should walk the talk at the end of the ultimatum, adding that besides the issue of teller points, a whole lot of problems associated with corporate governance among the banks should be addressed.

“The CBN should go beyond the threats of sanctions on those who are culpable. It should walk the talk,” Uwaleke said.

The CBN had on March 3, 2017 directed banks and authorised dealers to open teller points for retail FX transactions (PTA/BTA and SME) including buying and selling, in all locations in order to ensure access to foreign exchange by their customers and other users, without any hindrance.

The March 2017 circular also directed DMBs to have electronic display boards in all their branches, showing rates of all trading currencies, which it urged customers to insist on in processing their foreign exchange transactions for invisibles and the SMEs window.

While noting that the objective was aimed at creating awareness among members of the public regarding the availability of such facilities in branches of the banks at clearly disclosed prices, the CBN frowned on the banks for not fully complying with its directives.

Accordingly, the CBN on September 12 issued a month-long ultimatum to defaulting banks which elapsed on Friday, October 13, 2017, to fully comply with its directives or face regulatory sanctions.

Such sanctions, it noted, include but not limited to being barred from all future CBN foreign exchange interventions.

THISDAY investigations show that most banks visited in Abuja had substantially complied with the CBN directive.

However, what is not clear is whether this is a true reflection of all the banks’ branches across the length and breadth of the country.

Will the CBN dish out appropriate sanctions should there be defaulters?