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Friday, 7 August 2015

Why banks reject foreign currency deposits’


‘Why banks reject foreign currency deposits’
BANKS’ recent rejection of foreign currencies in deposits might have been informed by the consideration that they are idle resources that yield no benefit to them. The nation’s renewed fight against money laundering is another reason.
Already, there are indications that over $1 billion sitting idly in banks may have been mostly accumulated by the speculative exchange of naira for dollar and random opening and storing of the green back in domiciliary accounts.
More so, the barring of the 41 items from the official foreign exchange (forex) window has streamlined demand and opportunities for banks to trade short-term with the funds.
The naira may be heading back to the all-time low recorded recently when it hit N245 to a dollar at the parallel market, as it fell further yesterday to the range of N235 – N238 in different areas of Lagos, with the official rate remaining stable at N199 per dollar. It had on Tuesday exchanged for N225 at the parallel before noon but dipped further to N229 at the close of business.
And as banks publish lists of debtors, a major oil firm, MRS OIL & GAS COMPANY LIMITED, has denied owing FCMB the sum of N6.2 billion as claimed in a publication.
In a statement, MRS said: “This is evidenced by the report of our forensic auditors MCL Solutions Ltd. MRS, its forensic auditors and lawyers have made various attempts to reconcile this account with FCMB unsuccessfully. This led to our forensic auditors having to report the matter to CBN for intervention.”
A former Minister of Finance, Dr. Kalu Idika Kalu has equally faulted a publication linking him to BGL, one of debtor- institutions.
In a statement yesterday, he said: “I want to state categorically that I ceased being the non-Executive Chairman of BGL three years ago by a decision of its board in my absence. “It was said I was reassigned to chair its Advisory Board that has never since been set up.
All of that suited me perfectly. It is therefore not true that I am a director of BGL. Securities and Exchange Commission can confirm this fact if in any form of doubt. “Further, I can assert without any fear of contradiction that I am not owing any bank, any institution, or anybody, a kobo or a dime. And also, I am not a director of any debtor firm.”
Meanwhile, the Senate yesterday resolved to invite the Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, to brief it on the true state of the nation’s economy.
This followed the adoption of the motion by Nazif Suleiman of the All Progressives Congress (APC, Bauchi), entitled, “State of the Economy: Naira Depreciation and its Implication.”
The Senate also urged the Federal Government to step up efforts at diversifying the economy from oil export into an economy that depends on taxation, agriculture, manufacturing, international tourism and solid minerals prospecting.
The Managing Director of Cowry Asset Management Limited, Johnson Chukwu, said that though the initial market response to banks’ rejection of foreign currency lodgements pushed up the local unit, the tide was turning now over the temporary nature of the measure. “It is obvious that the banks cannot continue that way because it is not sustainable.
The real problem lies with the faltering fundamentals, like rising speculations over the inability of reserves accretion drive,” he said. The Head of Research, Afrinvest Securities Limited, Ayodeji Eboh, said the Deposit Money Banks’ (DMBs) stance was laudable, whether or not they are doing it for personal good.
According to him, the surging dollar levels in banks were facilitated by speculation and panic buying in anticipation of devaluations, which pressured the naira further, as individuals were withdrawing cash and exchanging them for dollar and storing same in their domiciliary accounts, where it yields no revenue for the bank.
As the domiciliary account may not have been designed for foreign currency storage, but a platform for foreign transactions, any storage of idle funds there becomes speculative, more so in this period dwindling external resrves.
In a report, the Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, had said it was not a regulatory directive for banks to stop accepting foreign currencies, but that CBN supports the banks’ moves.
According to him, it is abnormal, but only in Nigeria for individuals and customers to enter the banking hall to deposit foreign currencies in personal accounts for no transaction purposes.
Guaranty Trust Bank Plc, in a note to a customer, said it had to stop the collection of foreign cash deposit into the domiciliary accounts due to “unavailability of outlets” for managing it at all branches nationwide.
It also noted that foreign cash deposits made before now might not be eligible for outward electronic transfer but can only be withdrawn as cash, assuring that the measures are temporary until an alternative solution is proffered.
Nevertheless, the move to stop receipt of dollars by banks is strategic in containing the menace of money laundering and illegal fund flow from the country, presently put at $15.7 billion yearly by the Global Financial Integrity.
Again, the latest efforts against corruption and the introduction of Biometric Verification Number (BVN) in foreign exchange transactions may have enthroned a regime of checks, as well as caution for those who deal illegally in foreign currency hence a reduction in transactions and the glut in banks.
MRS alleged a smear campaign to tarnish its image and that of and its directors “judging by the antecedent and recorded actions against the company, one of which was the case filed against MRS at the High Court of Lagos State, which was later struck out by the court.”
It also alleged that it was overcharged, adding: “The incompetence of the FCMB team is further demonstrated where names of people who are not and have never been directors of the MRS are mentioned in the referred publication.
For the avoidance of doubt, Messrs Patrice Alberti, Andrew Gbodume and Paul Bissohong are not directors of MRS. “We therefore wish to assure our customers and business associates that we are NOT indebted to FCMB as claimed and published.
Our lawyers have been instructed to take appropriate remedial actions. “The company wishes to assure the general public that MRS Oil & Gas Company Limited will continue to transact its business with the highest ethical standards and in accordance with the extant laws of the country.”

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