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CBN to probe Forex Deals in April

By on March 5, 2012

The Central Bank of Nigeria (CBN) will next month probe  banks’ foreign exchange transactions.

Known in banking parlance as special or target examination, the investigation is to ensure that banks’ foreign exchange deals are in line with the stipulated rules.

The examination, it was  learnt, is to enable the banking watchdog to authenticate the huge demands by banks at the official foreign exchange market (Dutch auction system) where the apex bank has until, lately, continued to defend the naira with the country’s foreign exchange, which  had dropped to $34.74 billion, as at February 27.

The probe, according to a top CBN official, who does not want his name is print, would include the three nationalised banks – Keystone, Mainstreet and Enterprise Bank.

Similar exercise, which was to ascertain and verify the December 31 common year end results of banks, was concluded last Friday, The Nation learnt.

Other types include routine examination, which is conducted once a year by the CBN in collaboration with the Nigeria Deposit Insurance Corporation (NDIC) and maiden examination that is conducted six months after a new bank, has been established.

Five months ago, based on allegations of round-tripping, the CBN and the NDIC had probed the forex deals of 21 banks in three batches. The first were lenders that are top foreign exchange players.

These included Stanbic IBTC, CityBank, Standard Chartered Bank, Guaranty Bank, Zenith Bank, United Bank for Africa (UBA) and Access Bank.

The others were examined in the second and third phases of the plan.

The three nationalised banks were, however, excluded because they were new in the system.

Experts had said the consistent rise in forex demand, coupled with increased spread between the official and parallel markets, raised the risk of “round-tripping”, sourcing official funds for onward sales at the parallel market.

Last year, the CBN funded the forex market with about $28billion, which analysts said cannot be sustained if huge demands persist at the official forex market.

This had compelled the CBN to roll out some measures to curtail the demands at the official forex market.