Business
CBN Plans Legal Action Against FX Contract Violators
Nigeria’s apex financial institution, the Central Bank of Nigeria(CBN) has disclosed that it is considering legal actions against the violators of the foreign exchange forward contracts.
Although such legal action might not be taken instantly, but the apex banking institution has hinted that such will be done, after the completion of a forensic audit of those contracts.
CBN in a release on it’s website, has indicated that it is reviewing appropriate legal action to be taken against those who violate the rules.
“The Central Bank of Nigeria is reviewing appropriate legal action against parties found to have violated applicable rules and regulations, based on the findings of the forensic audit. The Bank will collaborate with law enforcement and regulatory agencies to pursue civil, administrative, or criminal sanctions, as necessary,” the document had indicated.
The release also indicated that the CBN Governor, Mr Olayemi Cardoso, had earlier revealed that the apex bank hired Deloitte to conduct a comprehensive forensic audit of all transactions in the Retail Secondary Market Intervention Sales, including undelivered forward contracts.
” The audit involved reviewing contract documentation and trade confirmations, verifying underlying trade transactions (e.g., import/export documentation, Form M, shipping and Customs records), confirming that contracts complied with applicable CBN circulars and FX market guidelines and ensuring that beneficiaries were genuine and eligible counterparties”, it stated.
On the outcome of the audit, the CBN said, the forensic audit has uncovered significant irregularities in the execution of some of the foreign exchange forward contracts.
” Each finding was based on objective and verifiable data, and all affected counterparties were given an opportunity to respond before final decisions invalidating these contracts were made.
” Some of the irregularities found include the company name on the approved sales result being different from the company name on the Form M portal and the cumulative value of the approved FX Forward Sales on this Forex Form Number from Auction 1 in 2021 to the date of this auction exceeding the total value of the forex form number, sales higher than demand, non-permissible items of import, unauthorised companies importing milk, vague narration of the item of import, and sales without demand.
“No right to FX settlement can arise under Nigerian law where the underlying transaction is tainted by illegality, misrepresentation, or non-compliance with binding regulatory rules. Invalid contracts were cancelled in line with audit findings. No FX payments were made on these contracts, as they did not meet the required standards for settlement, as noted in point 8 above. The naira previously received from counterparties in respect of these invalid contracts has been returned.
“The CBN is currently engaging with law enforcement authorities to determine appropriate action in cases involving potential fraud, misrepresentation, or abuse of the FX system; paying invalid contracts would have rewarded non-compliance, encouraged abuse of the FX system, and unnecessarily depleted the nation’s FX reserves.
” Our mandate is to maintain market integrity and protect Nigeria’s financial stability. Moreover, settling contracts that were legally void or irregular would have contravened the CBN’s statutory responsibilities and potentially exposed it to legal liability and loss of public trust,” the apex bank insisted.
Corlins Walter