LAGOS, AUGUST 24, 2016 – Nigerian bank executives met with central bank officials, banking sources told Reuters on Wednesday, a day after the monetary authority suspended nine lenders from foreign exchange transactions for failing to remit money owed to the government.
The suspensions from the interbank market were imposed after the banks failed to remit $2.1 billion, the government’s share of dividends from state-owned gas company NLNG, the sources said. They were due to pay the funds into the government account at the central bank.
Investors dumped bank shares on Wednesday while traders said the black market naira sank to a record low of 402 per dollar. .
Last year, President Muhammadu Buhari ordered all state accounts merged into that single account in a bid to reduce corruption.
Bankers told Reuters the central bank wanted the funds remitted in dollars, which are in short supply as Africa’s largest economy suffers its worst financial crisis in decades due to a slump in the price of oil, its dominant commodity.
The central bank tightened restrictions on the flow of dollars to domestic lenders in March, forcing the banks to delay hard-currency loan and trade repayments and increasing their risk of default.
One of the nine banks, FCMB, said it was working with the central bank to resolve the issue, which was function of illiquidity in the currency markets and the weak economy rather than willful non-compliance.
A second, UBA, denied it had withheld any government funds.
A third, First Bank, said it remits government funds when due but was discussing with the central bank and state-oil firm on ways of retaining the dollars to help solve forex shortages and meet its obligations.
There was no comment from the other six banks.
There were no trades on the interbank market until three minutes before the end of the session, when the central bank intervened with dollar sales, traders said.
Only three deals worth $0.75 million were traded at 305.50 naira per dollar, the level the market has closed at since Monday.
Traders said the central bank, which has been selling dollars almost daily since it floated the naira in June, had reduced the volumes of dollars it supplied.
Foreign investors – other past suppliers of dollars – have remained on the sidelines during the West African country’s financial crisis, making the central bank the main source of hard currency.
On Wednesday, Nigeria’s dollar reserves fell 2.5 percent from a month ago to $25.67 billion, its lowest level in more than 11 years, according to central bank figures.
But reserves may be far less when all future dollar commitments are included.
The central bank settled $1.2 billion worth of outright forward contracts it sold in June at 280 per dollar this week. It is due to pay $153 million in futures contract settled in naira on Wednesday.
