Nigeria: $21bn diaspora remittance – the odds against banks

*Money transfer.

*Money transfer.

10 September 2016, Lagos — Allegations and affirmed breaches of rules by banks are currently working against their quest to remain the sole administrator of the estimated $21 billion yearly diaspora remittances. For a fact, they have been enmeshed in controversies in recent times.

A regulatory source had told The Guardian that the new rule on International Money Transfer Operators was necessitated to foil banks collaborations with illegal money transfer operators. Even at the Bureau De Change Operators recently raised the alarm that majority of them were not disbursing the remittances to their members as directed by the Central Bank of Nigeria (CBN). The disbursements were also delayed for weeks after payment.

Before now, there were allegations that some of them were participating actively in the newly inaugurated flexible exchange rate policy at the interbank, raising speculations that the regulator would soon delist the culprits from their rank of dealerships.

Just a few weeks ago, nine banks’ failure to remit $2.3 billion belonging to the Nigeria National Petroleum Corporation (NNPC) and Nigeria LNG into the Treasury Single Accounts (TSA) jolted the system. But more worrisome was when the affected banks were alleging that they were not punished equally; as no fewer than six more banks were also involved, but not mentioned.

Now, these cases are raising questions about their propriety and credibility to continue to receive and disburse $21 billion Diaspora remittances to BDC operators. Now, top of the options is manifest in the mounting calls by stakeholders for the apex bank to outsource the dollar distribution role to a reputable independent distributor that would make the funds readily accessible to the BDCs. This, they insist, would strengthen the foreign exchange market.

According to a report, analysts at Lagos-based CSL Stockbrokers Limited predicted damning consequences, just like other financial experts, in form of fines, with some estimating about N450 million on all the erring creditors cumulatively, although there was no precedence of the case.

Also, former Executive Director, Keystone Bank, Richard Obire, said: “The CBN may want to demonstrate to the banks that it took their offences very seriously and make it painful to them. The regulator may want to make the fines painful to them, as a

But stakeholders are insisting that with these controversies surrounding banks’ in the handling of government’s forex transactions, they should be relieved of the role of disbursing the Diaspora funds to BDCs.

Of course, the regulator is passionate about inventing effective solutions to the lingering foreign exchange crisis and BDCs as critical stakeholder and agent in the mix, the new proposal may soon gather momentum with their push.

Acknowledging the role of the BDCs in achieving exchange rate stability and making forex available to the retail end of the market, the Central Bank of Nigeria (CBN) recently directed commercial banks to sell $50,000 diaspora-related forex on a weekly basis to nearly 3,000 BDC operators. But recent events now question banks’ position.

“Firstly, the indictment of nine banks by the CBN for refusing to remit $2.274 billion belonging to the Nigeria National Petroleum Corporation (NNPC)/ Nigeria LNG into the Treasury Single Accounts (TSA) as required by regulation is disturbing.

“Secondly, CBN’s complaints that the lenders are violating international money transfer rules, establishing private and company accounts to harvest dollar inflows from abroad without following the right Know Your Customer (KYC) requirements.

“Thirdly, the lenders have been accused by the CBN of engaging in round-tripping, taking advantage of the huge gaps between the official and parallel markets.

Also, banks resistance to CBN’s directive to sell $50,000 weekly from Diaspora remittances to BDCs. The banks refused to obey the order despite several pleas by the apex bank that they disburse the funds to the BDC operators to boost liquidity in the market,” a trader said.

But the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said that only 10 percent of BDCs from the Lagos market have so far accessed dollar from banks since the CBN gave the directive nearly a month ago.

“The proceeds of the international money transfer funds are not CBN money. It is not from the foreign reserves of the CBN. This is money that Nigerians in Diaspora, are sending to the economy. Before this money came through unofficial means, some sending through hands, and at the end of the day, the beneficiary will not even get the money. And in other countries, the Diaspora funds are strictly for BDCs,” Gwadabe said.

Spearheading the call, Gwadabe is now urging the CBN to outsource the dollar distribution role to independent distributor since the banks have failed in their assigned role.

He specifically said that so far the banks that are involved in the dollar sales to BDCs are FirstBank, Ecobank Nigeria, Fidelity Bank, United Bank for Africa, Unity Bank, Diamond Bank, Zenith Bank and Stanbic IBTC Bank.

Gwadabe disclosed that BDCs in Port Harcourt, Kano, Abuja, Onitsha, Maiduguri, Benin, and Enugu are yet to get a single dollar from these banks, while sales are above the interbank rate.

He argued that banks are supposed to sell to the BDCs on the same day within the week, but have failed to do so. “Instead of staggering the disbursement, the banks should sell to the BDCs on the same week-day, so that the impact will be felt in the market.

“Our members across the country have funded their accounts but the banks are not selling to them. The BDCs that met the CBN’s policy guidelines on the disbursement and cleared by the banks have still not received a dime from the banks.

“I think the banks are compromising the policy and CBN’s directive on the matter. And like I said earlier since the banks are not co-operating, I expect the CBN to take that role from them and assign it to a reputable independent distributor,” he advised.

The Acting Director of Trade and Exchange, CBN, W.D. Gotring, had directed authorised dealers to sell $50,000 weekly foreign currency accruing from inward money remittances to licensed BDCs. The directive was meant to ensure the stability of the exchange rate and encourage participation of critical stakeholders in the foreign exchange market.

But in another circular signed by Gotring, titled: Re: Transactions in ‘Free Funds’ by Authorised Dealers, CBN warned banks of discontinuing the buying and selling of forex without following stipulated guidelines, under the guise of “free funds.”

He reiterated that as provided in the laws and regulations governing dealings in forex, authorised dealers shall not sell forex without appropriate documentation and disclosure to the regulatory authorities irrespective of the source of the funds.

“Accordingly, authorised dealers shall deal with eligible transactions only, and not to engage in any foreign exchange transactions on terms inconsistent with the extant laws and or regulations,” he said.

Still, on the same illegal transactions, Gotring again raised the alarm over assessed compromise in the ways banks handle proceeds from international money transfer inflows into the country.

He specifically warned of opening multiple illegal companies and personal accounts where they harvest dollar proceeds for onward disbursements to recipients in Nigeria, a practice, he described as a violation of guidelines for the operation of International Money Transfer Service (IMTS) in Nigeria, warning the lenders to desist from such unwholesome practices.

“Further to the guidelines for the operation of International Money Transfer Service (IMTS) in Nigeria of September 26, 2014, we have observed that some Deposit Money Banks (DMBs) are operating accounts either as companies or companies masking themselves as individuals for the purpose of illegally receiving money transfer flows into the accounts for onward disbursements to recipients in Nigeria,” he said.

To remove oligopoly in the money transfer business, CBN has equally licensed 11 new IMTOs to join Western Union, MoneyGram, and Ria, which were previously cleared by the apex bank.

Gwadabe however, commended CBN’s bold decision, describing it as a right step in the right direction and in line with ABCON’s campaign that new operators be allowed into the market.

The new entrants are Trans-Fast Remittance LLC; WorldRemit Limited, UAE Exchange Centre LLC; Wari Limited, Homesend S.C.R.L, Small World Financial Services Group Limited and Weblink International Limited. Others are Cash Pot Limited, DT&T Corporation Limited, Fiem Group LLC DBA Ping Express, and CP Express Limited.

But Acting Director, Corporate Communications, CBN, Isaac Okorafor, said the approval for new entrants was in line with the apex bank’s efforts to liberalise the forex market, ensure liquidity and make forex more readily available to low-end users.

For Gwadabe, Nigeria BDCs can be strengthened to meet the forex demand at the retail end of the market so that they can continue to enhance employment generation in the country.

He said despite the challenges facing the economy, CBN and BDCs can work together to find sustainable solutions that can help the country wriggle out of the ongoing forex crisis and achieve full economic recovery.

Besides, ABCON has reached the final stage of automation of BDCs’ operations in Nigeria, and now seeking CBN’s certificate of no-objection on the project, as the automation plan has earlier been received by the CBN.

ABCON under Gwadabe has also pledged to ensure that purchased funds would be disbursed to end users and for eligible transactions only and shall render weekly returns on purchases from the banks to Trade and Exchange Department of the CBN.

He further promised to ensure strict compliance with the provisions of the anti-money laundering laws observance of appropriate KYC principles in the handling of forex transactions.

*Chijioke Nelson – Guardian

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