Banks Stop Receiving Foreign Currency Cash Deposits

In a apparent move to avoid sanctions from the Central Bank of Nigeria (CBN), banks in the country have started notifying their customers that they would soon stop receiving foreign exchange cash deposits from them.

Standard Chartered Bank Nigeria, in a mail to its customers, however, said it is going to stop receiving foreign currency cash deposit due to “lack of available foreign exchange cash outlets.”

The bank message to its customer reads in part “We are constrained due to the current influx of foreign exchange (FX) cash deposits we have been receiving in recent times, and the lack of available FX cash outlets, to stop receiving FX cash deposits.

“As a result, the Bank will be unable to receive your FX cash deposits from Tuesday, 11th August 2015. This is a temporary arrangement until the situation improves.

“However, the Bank will continue to receive, into your domiciliary account, your inward FX telegraphic transfers from other banks. You will also continue to have access to funds in your domiciliary accounts.

“We will contact you as soon as we are able to continue receiving your foreign currency cash deposits.

Reacting to the development, former Deputy Managing Director of Mainstreet Bank, Anor Anyanwu, said the plan by banks to stop receiving forex cash deposit indicate that banks are complying with the CBN policy on dollarization, adding that it is also clear that further tightening will follow.

“Banks are trying not to fall under the axe of the CBN as regards the forex policy and dollarisation of the economy,” Anyanwu stated.

On his part, the Managing Director/ Chief Executive of Financial Derivatives Company Limited, Bismarck Rewane, expressed fears that the Central Bank of Nigeria (CBN)’s directive on domiciliary accounts could turn out to be a tool for taxation or witch-hunting.

He described the directive by the apex bank mandating banks to give information on domiciliary account holders and balances as a breach of confidentiality.

According to him, the CBN, believing that domiciliary transactions are used for round tripping by banks, directed that banks submit details of domiciliary account holders, including name, account number and balances as at January 29, 2015.

It also required banks to present total balance of all domiciliary accounts as at the same date, list of corporate domiciliary account holders and their balances, list of individual domiciliary account holders and their balances, list of public sector institutions domiciliary account holders and their balances as well as the mode of lodgement to the account transactions (either cash or by wire transfer).

Domiciliary deposits were equivalent to 21 per cent of the N17 trillion or $19.5 billion deposits in the Nigerian banking system as at half year 2014, according to data from an investment firm, Renaissance Capital.

Stating that the apex bank had given the directives based on its concerns about the high level of domiciliary balances at an average of one per cent per annum, Rewane noted that the move will spur a rush of transfers to overseas banks, even as he expressed fear that the CBN will now seek for information on naira accounts.

He also postulated that the apex bank will increase net open position of banks from the present level of 0.5 per cent to 1 per cent, even as the naira is expected to trade at N195 and N210 to the dollar at the interbank and parallel markets respectively.

While condemning the rising trend of currency substitution and dollarisation of the economy in recent time, the CBN had reiterated that the naira remains the only legal tender in the country.

In a circular to all banks issued by Director of Banking Supervision, Mr. K. O. Balogun, the CBN warned deposit money banks in the country to desist from the collection of foreign currencies for payment of domestic transactions on behalf of their customers and the use of their customers’ domiciliary accounts for making payments for visible and invisible transactions (fees, charges, licences e.t.c) originating and consummated in Nigeria.

The CBN also warned that appropriate sanctions shall be meted on any bank that breaches the regulation.

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