Nigerian Banks Banned From Currency Trading Face Fines, CSL Says

Nigerian banks barred from the interbank foreign-exchange market may be fined and face the loss of customers and trading income, analysts at Lagos-based CSL Stockbrokers Ltd. said.

The Central Bank of Nigeria suspended nine lenders for not transferring around $2.3 billion of deposits for two state oil and gas companies, Nigerian National Petroleum Corp. and Nigeria LNG Ltd., to a government account at the regulator, Lagos-based ThisDay newspaper reported Tuesday. The banks include First Bank of Nigeria Ltd., the nation’s largest lender by assets, United Bank for Africa Plc, Diamond Bank Plc and FCMB Group Plc, the newspaper said.

“The CBN may impose various fines,” analysts at CSL said in a e-mailed note. “Of greater concern to us is the ability of these banks to remit these funds given the illiquidity in the market. Inability to remit these funds will mean staying away from all forex transactions for an extended period.”

Nigeria’s banks have suffered a shortage of hard currency for the last two years as oil prices crashed and investors fled when Africa’s most populous country imposed capital controls to try and protect the naira. Oil accounts for around 90 percent of exports and the bulk of government revenue. The naira has weakened 42 percent against the dollar since it was devalued on June 20.

Diamond Bank’s shares fell 8.9 percent, the most on Nigeria’s benchmark equity index, to 1.12 naira by 2:11 p.m. in Lagos. FCMB dropped 5 percent, while FBN Holdings Plc, First Bank’s owner, was down 1 percent and UBA 0.9 percent. The index fell 0.1 percent to 27,785.95.

Diamond Bank, which is meant to transfer around $287 million, is in discussions with the central bank, according to Lagos-based spokesman Mike Omeife.

“Because of the crash in the local currency, the banks expected the CBN would have allowed them to pay in naira instead of dollars,” Omefie said by phone. The ban has “been there for a long time. It does not affect our normal operations” including customers’ local and foreign-currency deposits or local and international payments, he said.

UBA has “completely remitted all NNPC and NLNG dollar deposits,” Charles Aigbe, a spokesman in Lagos, said in an e-mailed statement. First Bank, meant to repatriate around $470m million, will make a statement today, spokesman Babatunde Lasaki said by phone.

The banks probably won’t be able to issue letters of credit and will lose revenue from trading foreign-exchange until their suspensions are lifted, CSL said.

“While most of the banks we spoke to agree that they have these NNPC funds, they do not agree that these were concealed from the CBN,” the CSL analysts said. “A few of the banks blamed their inability to comply on the tight dollar liquidity in the system brought about by the ongoing restructuring of oil and gas loans and the general scarcity of” of foreign exchange.