The Central Bank of Nigeria (CBN) has warned authorized dealers to ensure that transactions in the forex market are conducted transparently and any form of price distortion leading to market manipulation will face sanctions.
The apex bank disclosed this in a statement by the Director of the Financial Market Department, Aliyu, M. Ashiru yesterday where it stated that investigations have revealed cases of underreporting of transaction rates and fixed income transactions.
According to the statement, the apex bank allows financial market transactions to be conducted on a “willing buyer, willing seller” basis.
It stated,
- “All Authorised dealers are reminded that the Central Bank of Nigeria (CBN) has permitted financial market transactions to be conducted on a ‘willing buyer, willing seller’ basis, and therefore expects prices to be quoted and displayed transparently”
- “The attention of the CBN has been drawn to the practice of authorized dealers (and their customers) in reporting inaccurate and misleading information on transactions concluded in the financial market. Ongoing investigations have revealed instances of underreporting of transaction rates and practice of second cheques on foreign exchange and fixed income transactions”
The lender of last resort further warned that such practices run counter to the ethics of proper financial market and will not be tolerated going forward.
It said,
- “Deliberate attempts to create price distortion by reporting false transaction details amounts to market manipulation which will not be tolerated and henceforth face sanctions”
What you should know
Yesterday, the CBN announced that it had cleared another tranche of $500 million of verified forex liabilities from its backlog estimated at $7 billion.
However, the action did not make much impact as the naira crashed to an all-time low of N1,348.63/$ on the official window representing a decline of 33.87% and almost kissing the parallel market rate.
On the unofficial window or parallel market, the naira depreciated by 2.76%, quoted at N1,450/$1.
It seems no system in Nigeria is insulated from fraud anymore. Money flows illegally through the banks and one tends to believe that the bankers are accomplices to yahoo boys, kidnappers etc. Many unpatriotic Nigerians operate domiciliary account even when they live and work in Nigeria, they collect salary in naira and convert to dollars thereby creating artificial demand that now eroding purchasing power locally
I’m with you on highlighting the complicity of bankers who look the other way while the financial system in Nigeria is used to launder money from illicit and criminal activities.
But, I’m not sure if it’s right to blame people who change their salary from Naira to dollars to keep their money’s value safe from the Naira losing value.
If the CBN were truly committed to protecting the Naira, it should raise domestic interest rates and reduce the Naira’s domestic money supply, given that we still have too much in circulation thanks to the Ways and Means printing experimentation of Buhari and Emefiele that went wrong.
This approach would create a conducive environment for earners and savers to earn through interest and capital appreciation domestically, rather than feeling compelled to convert their assets into dollars as a defense against inflation.