By Ademola Alawiye

The Central Bank of Nigeria may penalise 21 deposit money banks for round tripping and other violations of foreign exchange transactions.

A CBN source told our correspondent on Monday that many of the banks might have been involved in round tripping, which had led to a huge demand by banks from the foreign exchange market.

Round tripping is an action that attempts to inflate transaction volumes through the continuous and frequent purchase and sale of foreign exchange.

The source, who craved anonymity because he was not permitted to speak officially on the matter, said, “The CBN is particularly concerned about the enormous demand always witnessed at the foreign exchange market. It will like to know where exactly the problem is coming from. There are banks that are definitely involved in this illegal act. And that is why we have decided to check the books of the banks.

“It’s all in a bid to control foreign exchange dealing. The CBN has not been meeting demand at the bi-weekly auctions for a long time now. We have been defending the naira with the country’s foreign exchange and it cannot continue like that.”

The source added that the fresh investigation was necessitated because the Minister of Finance, Dr. Ngozi Okonjo-Iweala, was concerned about the high demand of foreign exchange and the wide margin between the official market and the parallel market rates.

The CBN had on Friday informed 21 DMBs that are top foreign exchange players that it would verify their foreign exchange deals.

A senior official of one of the banks, who did not want his name mentioned because of the sensitivity of the matter, confirmed to our correspondent that the CBN had written to the banks.

He said, “The information came on Friday that CBN staff would be coming on Friday to investigate our foreign exchange transactions, especially the treasury unit. However, we’ve yet to receive anybody from the CBN, even though the regulatory unit has been compiling the reports. They have not done it in a long time.

“When they come, they will want to check the blodder, where we render all forex transactions, the oil bids and major companies that buy large chunks of foreign exchange.”

The Head, Corporate Affairs Department, CBN, Mr. Mohammed Abdullahi, confirmed the report, saying, “We want to verify the forex we give them. This is not the first time we are doing it. The CBN has always been verifying the books of the banks.”

In a bid to check arbitrage or round tripping created by the widening gap between the official and parallel exchange rates, the CBN recently increased weekly sale of official foreign exchange to Bureau De Change operators by 100 per cent from $50,000 to $100,000.

Prior to that, it had increased the amount of foreign exchange banks could sell to BDCs per week from $500,000 to $1m.

Meanwhile, the naira eased against the United States dollar at the inter-bank market on Monday, as dollar supply from the CBN’s bi-weekly auction fell short of demand.

The local currency weakened to N155.78 to the dollar at the inter-bank market on Monday, down from N154.77 to the dollar on Friday.

Demand at the official window stood at $541.23m, more than the $400m that was sold at N152.81 to the dollar by the CBN at the auction.

The regulator sold $600m at N152.40 per dollar at the only auction last week.

Source: Punch