…MDs to partner CBN to resolve FX issue
…Wigwe heads bank CEOs’ body
…Naira plummets to N410/$
If the Central Bank of Nigeria (CBN) does not rescind its decision on the eight lenders it barred from foreign exchange transactions, their correspondent banks have threatened to keep them on its watch list, New Telegraph has learnt. Also, more woes may be ahead for the Nigerian economy, if banks as a last resort, recall their loans to the power sector.
These were the highlights of the meeting of bank Chief Executive Officers (CEOs) in Lagos yesterday, as exclusively reported by this newspaper
But after an extensive deliberation, it was agreed that the recall of the power sector loans would be the last option if all entreaties to the CBN Governor, Godwin Emefiele, fails. This was part of drastic measures that lenders are taking to deal with the increasingly tough business environment. The source stated that yesterday’s meeting was the first time in the history of the industry that banks will agree to speak in one voice.
A correspondent bank is a financial institution that provides services on behalf of another, equal or unequal, financial institution. It can facilitate wire transfers, conduct business transactions, accept deposits and gather documents on behalf of another financial institution. If the affected lenders’ correspondent banks place them on their watch list, their customers would not be able to execute banking transactions abroad.
A watch list is used to specify companies where irregularities are present, or where the potential for insider trading or other corruption exists. The watch list can be considered a surveillance tool used to identify risks from customers, consultants, suppliers and other business partners.
Meanwhile, yesterday’s meeting, which saw the Group Managing Director/ CEO, Access Bank, Mr. Herbert Wigwe, emerging as the Chairman of the association, was called in response to the banking watchdog’s suspension of nine banks from the interbank forex market for allegedly failing to remit funds to the Federal Government’s coffers in line with the Treasury Single Account (TSA) policy.
The source said: “The banks have decided to ensure that the issue with the CBN are amicably resolved through swaps with the apex bank over a 24-month period.” Analysts point out that with the Nigerian National Petroleum Corporation (NNPC) being heavily indebted to the banks, the decision to recall the loans could lead to the collapse of the critical power sector, thereby worsening Nigeria’s economic woes. The International Monetary Fund (IMF), last month, said Nigeria’s economy would contract by 1.8 per cent this year.
The Fund, which cuts its 2016 growth forecast for the country from 2.3 per cent projected in April, reduced its 2017 growth projection for the country to 1.1 per cent from 3.5 per cent. This newspaper recently reported that power sector investors in Nigeria sourced over $10 billion from banks and other lenders for the purchase of 10 power plants and the distribution firms during the last privatisation exercise.
While over $5 billion loan facilities were secured for unbundled Power Holding Company (PHCN), the lenders also offered $5.8 billion for the purchase of electricity Generating Companies (GENCOs) including Alaoji, Calabar, Omotosho, Olorunsogo, Omoku, Ogorode, Geregu, Gbarain, Benin and Egbema.
It will be recalled that the inefficiencies in the privatised power sector resulted in banks being unwilling to provide fresh loans to electricity generation and distribution firms. In addition, banks were concerned about issues around the tariff, as they contended that aside from the fact that the tariff was low, there was no sign that the Federal Government would increase it any time soon to adequately meet the revenue requirements of the power sector.
The CBN, in its Quarterly Statistical Bulletin for the first Quarter of 2016, stated that energy firms, comprising oil, gas and power companies, got a total of N3.799 trillion credits from banks as at March 31, 2016.
In a statement issued on the outcome of the meeting last night, the Registrar/ CEO of the Chartered Instituted of Bankers of Nigeria (CIBN), Mr. Seye Awojobi, said the body of bank CEOs agreed to partner with the CBN to resolve the forex issue.
According to the statement, the body, which was formed under the auspices of the CIBN, emphasized that it would work towards ensuring that the sanctioned banks comply with the directive of the CBN on the TSA funds as soon as possible, “to avoid negative impact on the economy.”
However, the body stressed: “there was no concealment of the exposure in any form as the banks had always disclosed the funds in their returns. “That the situation arose out of the maturity mismatch of funds found in certain strategic sectors to ensure the growth of the economy.”
The bank CEOs, according to the statement, unanimously agreed that “there is no crisis in the industry as it is strong and stable.”