Leaked memo: CBN instructs banks to block bank account of 38 companies for “forex abuse”

Sunday, September 6,2020

A memo circulating online (see below) indicates the central bank has instructed banks to Post-No-Debit on account of 38 companies.

A Post-No-Debit (PND) is basically an instruction to banks not to allow any withdrawals or transfers from the bank account of account owners, essentially blocking the account from outflows. It is usually drastic a measure taken to allow for investigation and possible to reclaim any illegal inflow into an account.

The CBN did not state why the accounts were flagged but sources inform us that it is due to suspicion of forex infractions.

The CBN Instruction read as follows

“You are hereby required to place the under listed accounts on Post-No-Debit with immediate effect and revert with the account names, numbers, currencies and balances of all accounts placed on PND.”

The list includes the accounts of Premier Lotto Ltd a popular lotto company and the owers of the widely used “Baba Ijebu” lotto platform. It also includes several Burea De Change operators, oil and gas firms and several other companies.

CBN barks: On August 26, the Central Bank of Nigeria (CBN)  announced it will go tough on exporters who are guilty of forex non-repatriation.

  • It also directed banks to submit the names, addresses, and Bank Verification Numbers (BVNs) of all the exporters who have failed to repatriate their export proceeds.
  • And warned “necessary ‘action’ would be taken against such defaulters.
  • A few days earlier the CBN issued a circular removing buying agents/companies or any third parties from accessing its SMIS forex window through FORM M forex purchases.
  • The apex banks instructed that “Authorized Dealers are herby directed to desist from the opening of Form M whose payment is routed through a buying company/agent or any other third parties” effectively eliminating third parties or middlemen from transacting in forex deals in its official SMIS window.
  • What they are saying: An article from TheCable suggests one of the Lotto companies on the list transferred $420 million abroad “under the guise of purchasing software” but the funds were later traced to the bank accounts of some of its directors.
    • “The forex was sourced from the black market, thereby putting pressure on the exchange rate. The gaming companies are awash with naira which sit in their bank accounts, so they devised a way of moving the funds abroad,” a source told TheCable.

    Why this matters: This latest move by the CBN can be viewed in two major ways.

    • Firstly it is a message to traders that the central bank has better tools it can use to monitor forex roundtripping and abuse by BDC’s and other forex traders. BVN is a strong tool that gives banks better visibility over forex utilization.
    • Secondly, it also demonstrates the CBN could be under immense pressure as actions like this might be construed as a sign of weakness by foreign investors

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