Why CBN is probing forex dealings of some companies ~Official
The Central Bank of Nigeria (CBN) has embarked on investigations into the foreign exchange transactions of over 100 firms for illegal forex dealings in a bid to curb round-tripping and arbitraging in the domestic market.
According to any official of the regulatory bank, the companies under investigation were accused of buying dollars through the black market to carry out foreign transactions not sanctioned by the CBN.
Round tripping is when foreign currencies are purchased from official sources at a relatively cheaper rate and recycled back to the system rather than use it for the purpose for which it was purchased.
On the other hand, arbitraging involved trading in foreign exchange by rent-seekers who take advantage of the differential in rate in one market to the other.
The companies, which were suspected to have traded in free fund that should have been repatriated by firms involving in export business against the rules of the CBN have had their account frozen by the regulator.
“The CBN has the prerogative of dealing in foreign exchange and set the rule of engagement in the market. Therefore, any company or bank that violates such rules are deemed to have breached the regulations and would be sanctioned,” a senior official of the bank told one of our correspondents.
The official also stated that the regulatory bank was determined to check money laundering and sources of terrorism funding to protect the country from global sanctions.
“It’s the responsibility of the CBN to ensure that all foreign exchange inflow into the country are tracked and pass through the official channels,’ the official said.
The CBN accused the companies of moving forex through illegal sources and launder it through the legitimate channels without proper documentation.
The companies were said to be responsible for the pressure on the local currency and the depreciation in the local currency in recent time.
The source also revealed that some unscrupulous companies use this guise to conduct export activities on what is regarded as open accounts without completing NXP forms before conducting their export activities thereby avoiding repatriating the forex back to the country through approved and recognised channels.
These illegal exporters, he stated, are known to compromise officials of shipping lines and companies, who turn blind eyes by not demanding for NXP form numbers.
The CBN and customs have always insisted that for any export activity to be conducted, NXP numbers must be stated on all export documents to the shipping companies but the shipping lines have failed in making such requests from the illegal exporters.
“There are also cases where some blatantly go to the BDCs to buy huge dollar cash, deposit them in banks, and resort to transfer of such funds for such unauthorised transactions without documentation using the online medium usually regarded as Straight Through Processing (STP).
“CBN insists that all forex transactions must pass through the I&E window and the banks to provide full visibility, hence the reason for the ongoing investigations to stop these forex malpractices.”
Last week, GFD reported the investigation into the activities of some betting companies, owned by Keshintgton Adebutu and a House of Representaives member, Akin Alabi over illegal forex transactions.