Home Business Three Banks Fingered in Diversion of Diaspora Remittances To Parallel Market

Three Banks Fingered in Diversion of Diaspora Remittances To Parallel Market

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By Chisaa Okoye (Business Reporter)

 
Three Nigeria’s tier-one banks and a top tier-2 bank have been identified as the commercial banks mostly engaging in illegal sales of foreign exchange.
Checks by ARMADANEWS reveal that these three banks, rather than selling FX to their customers, divert most of their forex to the unofficial foreign exchange market.
These illegal FX trading has further weakened the naira to over N950/$1 at the parallel market.

The Central Bank of Nigeria (CBN) has vowed to sanction deposit money banks engaging in illegal sales of foreign exchange.

Delivering a lecture titled, Diaspora Remittances and Nigerian Economic Development, in Abuja recently, the acting CBN Governor, Folashodun Shonubi, stated that diversion of remittances from Nigerians living abroad to the parallel market was responsible for the crash of the naira.

The naira hit a record low of N950/$ at the parallel market on Thursday.

Speaking at the occasion, Shonubi said that many funds sent back to Nigeria by diaspora workers were diverted to the parallel market without being formally documented.

Shonubi said: “With those remittances, the dollars have come in, we know the dollars have come in but we don’t see them in the official system. So, they must be going somewhere.

“And the challenge with the black market, unofficial market or parallel market or whatever name you want to call it, it is not regulated, and it becomes an easy place to have criminal activities.

“We investigate bankers, not just bankers, anybody who has committed an offense, the first thing they want to do is to run to the black markets, change it to the dollars because it is less money to carry around.

“Some of the funding in the black markets are actually from diaspora remittances. That’s why it is important we need to know a lot of what’s going on there.

“We can’t play the sentiment game. If we don’t understand the dynamics, we usually go with the literature which does not necessarily work for us.”

He insisted that a major portion of the inflows that entered Nigeria through several unauthorized avenues ended up on the parallel market were responsible for Nigeria’s current FX woes.

The CBN boss stated that the apex bank would put policies in place to control illegal remittances.

“We talk about black markets, which also create their own problems. Management of the foreign exchange market and the efficacy of our policies to manage the exchange rate becomes difficult due to our diaspora remittances which are going to other markets,” he said.

He added: “Today, someone called me privately and said that this thing (naira) has gone up to some levels in the black markets, my question was, what do you want me to do? Do I operate in the black markets? I don’t know the basis of pricing in the black markets.

“The other thing people don’t realise is that, because you don’t have full information, and I will give you an example. Since we started the I&E window, we found out that some people would deliberately wait until the last minute and do one transaction of $5,000 and that becomes the closing rate.

“We can’t do without diaspora remittances. For many countries, that’s their main source of income.”

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