Nigerian Banks Face N100m Penalty for FX Transactions
- The CBN has introduced a N100m fine on banks for processing undocumented forex transactions
- Banks also face stricter penalties, including suspensions, for reporting breaches and FX limit violations.
- The apex bank new rules aim to boost transparency, compliance, and efficiency in Nigeria’s foreign exchange mark
Legit.ng journalist Dave Ibemere has over a decade of experience in business journalism, with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The Central bank of Nigeria has mandated banks to pay N100 million as penalty if foreign exchange (forex) transactions without necessary documentation are processeda.
The penalty was included in the fourth edition of the Forex Manual released by the CBN released last week and is the first major update of the framework since 2017.
Source: Getty Images
Olayemi Cardoso, CBN governor stated that the review of the forex manual was necessary to align Nigeria's forex administration with the prevailing dynamics and reform policies in the economy.
New FX penalty for Nigerian banks
Under the revised framework, authorised dealers that conclude forex transactions without proper documentation will be fined N100 million per un-documented transaction and pay an additional N10 million penalty for every impacted transaction.
This decision comes amidst ongoing reform efforts by the CBN to re-establish confidence in the Nigerian forex market following years of currency scarcity, parallel exchange rates and lack of investor confidence.
Also in the updated framework, stronger penalties were introduced for banks that violate prescribed Net Open Position Limits.
Whereas first-time violators will get a warning letter, a second infraction warrants a suspension from the forex market for 10 working days, with a third breach leading to a suspension from forex market participation for 90 days.
In addition to these, banks are to submit daily returns on forex transactions between 9:00AM and 10:00AM of the next working day and weekly returns by the end of five working days after month end.
Failure to do so attracts a penalty of N500,000 and a minimum fine of N5 million plus a further penalty of N500,000 per day the violation persists, respectively.
Why FX new rules
According to the CBN, the purpose of the revised framework was to bring transparency to inflows and outflows of forex, enforce improved documentation and reporting requirements, and ensure efficient channeling of forex resources to key sectors of the economy.
Importers and exporters are not left out of the revised forex regulations, which now demands from the former to present their Exchange Control Documents within 90 days of negotiation with their overseas correspondents, for the latter there are restrictions from foreign exchange market participation for a minimum period of 360 days, and any fourth infraction can be met with indefinite exclusion from the forex market.
Source: Getty Images
For exporters, all oil and gas related earnings must be repatriated within 90 days of shipment, whilst for all non-oil export earnings, repatriation is required within 180 days of shipment and failing to do so incurs a penalty equivalent to 1% of the naira value of the amount un-repatriated, Punch reports.
However, other aspects such as the advance payment for imports have been revised to 30% of the invoice value of goods from 15% as previously stipulated and Form NXP used in export transactions has been waived of processing fees, while there have been additions for service exports, technology based payments and transactions on the Pan African payment and settlement systems.
It is expected that these changes will strengthen Nigeria's foreign exchange market through reduced transaction delays, better compliance, increased market confidence, and improved integrity.
Naira to dollar exchange rate
Earlier, Legit.ng reported that the naira has weakened slightly against the United States Dollar, while other currencies remain relatively steady at both official and unofficial markets.
Latest data from the CBN showed that the naira weakened slightly against the United States Dollar, in the official Nigerian Foreign Exchange Market (NAFEM).
The local currency depreciated by 17 Kobo or 0.01% to close at N1,373.87/$1, compared with N1,373.70/$1 recorded in the previous trading session.
Source: Legit.ng
