The 9 banks barred from forex transactions – how they got on the list

by Roqeebah Olaoniye

The bar

On Tuesday 23rd August, the Central Bank of Nigeria released an updated list of 9 banks who failed to remit $21.2billion meant for the Nigerian National Petroleum Corporation (NNPC) into the Treasury Single Account (TSA). Their punishment is to remain barred from foreign exchange transactions until all the monies are remitted. For now. There might be even more sanctions to come.

Anything that concerns the foreign exchange market right now is very sensitive matter of collective national concern. So while, in the past, this news would have met with next to no reaction from the ordinary Nigerian (except to check their bank balance to see it’s still intact and in extreme conditions, move said balance to a bank not on the list), now many people are asking: Why tamper with FX? What’s the connection between FX, NNPC, TSA, and more importantly; Why reduce the number of banks that can trade?

Here’s a breakdown to help you understand and hopefully put your mind at ease.

Let’s start with the TSA

The Single Treasury account is a public accounting system with one account that sort of has arrows pointing this one account from a set of interconnected accounts. It simply ensures that all revenue belonging or accruing to the Federal Government are done under one umbrella account at the Central Bank of Nigeria. That umbrella account is the Consolidated Revenue Account (CRA).

So TSA is the system; CRA is the account, and CBN is the bank that holds all the money.

How then do commercial banks come in?


Seeing as you cannot go and make deposits at the CBN, the commercial banks or Money Deposit Banks (hey there finance gurus) are very crucial to the successful implementation of the TSA.  The commercial banks maintain the primary revenue accounts for Government agencies, departments, partners et cetera so while you need to pay the government Valued Added Tax as an individual or any other transaction we have with the Federal government (e.g Federal Universities school fees and such), you do not have to go to the CBN for that. All that is required of the commercial banks is that they remit all monies that have collected on behalf of the government to the CRA lodged at the CBN at the end of every banking day.

Starting to see the link?

No? Okay.

The NNPC is a government agency. It might  not seem as though they are seeing as some of their gas stations insist on selling at almost the same price as the others but yes they are and both their Naira and Dollar as well as other Foreign deposits are made to commercial banks, again to be remitted to the Central Bank at the end of every banking day.

So what’s the problem?

We noticed the trend in October last year when the Central Bank of Nigeria fined First Bank of Nigeria Plc and United Bank for Africa Plc the sum of N4.819 billion for failure to remit NNPC’s funds compliance with a directive issued earlier September by the President that all the banks must remit funds belonging to the government to the CRA.

Next was Skye Banks and now there are 9 banks in default.

In case you’re wondering why they are being sanctioned only for NNPC’s funds, we’ve got you…

So in June, a report by the National Extractive Industries Transparency Initiative (NEITI) which acts as some sort of auditory body for NNPC and like corporations, was released indicting the NNPC of failing to remit about 13.294 billion USD to the Federation Account (read: TSA) for a period of 9 years. The NNPC rejoined saying, most of the money was spent on running the Corporations and the rest, TRANSFERRED TO THE BANK.

We had to find the balance right?

The culprits have been found to be; First Bank of Nigeria Limited ($469m); Diamond Bank Plc ($287m); Sterling Bank Plc ($269m); Skye Bank Plc ($221m); Fidelity Bank ($209m); United Bank for Africa ($530m [Update: this bank has now paid their own share of the money we hear]); Keystone Bank ($139); First City Monument Bank (FCMB) $125m; and Heritage Bank ($85m). Your bank isn’t there? Well good for you, and your bank.

But what has this got to do with FOREX?

Oh! Let’s breeze over CBN’s role. Beyond being the bank that houses the Consolidated Revenue Account, the CBN is the regulatory bank, the apex bank in Nigeria and essentially reserves the right to sanction commercial banks.

The apex bank also manages foreign exchange inflow and out flow. In this capacity, the bank issued a new policy on the foreign exchange market. The new policy is market-driven flexible exchange rate regime to ease the foreign exchange. All that to say that the Naira was supposedly floated against the dollar at the inter-bank market and buyers of FOREX now have to source from the banks as opposed to relying on whatever figure the CBN fixes the exchange rate. The point was to suppress the parallel market.

So now these defaulting banks, that have failed to remit NNPC funds in their coffers have now been suspended from the foreign exchange market which was just recently opened to all.

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