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CBN unveils forex market abuses, vows sanctions

Apex bank to collaborate with relevant agencies in penalizing those responsible for non-compliance

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The Central Bank of Nigeria (CBN) has revealed instances of infractions, gross abuses, and non-compliance with foreign exchange market regulations, pledging to take punitive measures in collaboration with relevant agencies. This development, disclosed by the CBN Acting Director of Communication, Mrs. Sidi Ali, comes in the wake of the removal of the rate cap on the exchange rate and other measures aimed at unifying the exchange rate, which contributed to the depreciation of the naira and heightened inflation.

In a statement issued in Abuja on Wednesday, Ali stated that the CBN had forward contract obligations exceeding $7 billion to banks and firms. To address the backlog of outstanding foreign exchange liabilities, the apex bank has reportedly paid approximately $2 billion across various sectors, including manufacturing, aviation, and petroleum. Ali highlighted that the bank had cleared the entire liability of 14 banks and initiated settlements with foreign airlines.

Despite ongoing efforts to settle legitimate foreign exchange backlogs, the statement emphasized the grave infractions revealed through an independent forensic review commissioned by the CBN. The review disclosed significant non-compliance with market regulations, prompting the apex bank to enforce appropriate sanctions in collaboration with relevant agencies. Ali expressed the CBN’s commitment to sanitizing the financial services sector and fostering trust among market participants and stakeholders in the Nigerian economy.

Reports estimate the CBN’s forward contract obligations to banks at $7 billion. Recent scrutiny by the Economic and Financial Crimes Commission into alleged preferential forex allocations to companies, including Dangote Group, adds to the challenges faced by the apex bank. The anti-graft commission has requested documentation supporting the allocation and utilization of forex by 52 companies at official rates over the last decade, signaling a broader investigation into forex transactions.

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