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Why DSS is beaming its searchlight on CBN, banks’ foreign exchange allocation

Why DSS is beaming its searchlight on allocation of FX by banks, CBN

The opaque foreign exchange (fx) allocation mechanism in Nigeria has become a major area of attention for investigators of the secret police, who are piling up evidence on chieftains of the Central Bank of Nigeria and its governor, Godwin Emefiele, BusinessDay has learned.

Although their probe is wide-ranging, the investigators have apparently chosen to zero in on how the banks allocate the scarce foreign exchange and the criteria for the allocation at a time many business leaders increasingly rely on the black market to satisfy the FX requirement for their companies.

Each bank has its own FX allocation committees, but DSS operatives want to know if the allocation was determined by the committees on their own or if it was authorised by someone at the Central Bank to benefit favoured Nigerians and their foreign collaborators who stand to benefit massively from the subsidised rates applied.

According to a senior banker, the scarcity of foreign exchange coupled with the multiple exchange rates and the opaque nature of the allocation have led to charges that only the favoured customers of banks can access the greenback at the official rate.

Typically, a bank customer will approach his bank in search of foreign exchange. The customer will then submit all the required documentation, and then he must adequately fund his account. Only then does the customer enter an almost endless queue waiting for the FX allocation.

This wait can go on for up to a year. Bankers say at the international banks in Nigeria, the process can be one of true first in first out but not so at many local of local banks where the process is subject to manipulation from within and from outside.

The CBN has consistently maintained that it will unify the rates but in practice the rates continue to diverge, opening growing opportunities for arbitrage for the privileged few.

BusinessDay reported earlier Tuesday that the department of state security, DSS has opened wide-ranging investigations into foreign exchange received and their subsequent allocation to customers by each deposit money bank in the country and the involvement of the Central Bank of Nigeria.

Read also: We did not invade CBN, says DSS

The investigation comes at a time of increasing searchlight on the governor of the apex bank Godwin Emefiele who the bank said resumed work on Monday after several weeks overseas amidst allegations that he was being sought by the secret police.

According to our reporters, the bank CEOs have been given a deadline of Wednesday, January 18, 2023, to provide detailed information about the privileged individuals and companies that have been given foreign exchange allocations since 2017.

Specifically, the CEOs are to provide a schedule of the I & E forex allocated to the individual banks from 2017 to date. The said schedule should be broken down into amount allocated to the bank, the name of the individual customer and/or beneficiary/beneficiaries and the basis/criteria for the allocation.

The bank CEOs must also say who authorized the allocation in each case, whether it is the CBN and/or the deposit money bank itself.

They are also to provide a summary of the TOP 50 customers who received the most FX allocation, in order of magnitude.

Emefiele has been at the receiving end of attacks for years over his unorthodox monetary policies, but troubles expanded after his shocking decision to join the presidential race while still holding office.

On December 27, 2022, it emerged that the DSS had been in court via an ex parte application marked FHC/ABJ/CS/2255/2022 and in which the secret police sought an order to arrest the CBN governor over alleged acts of financing terrorism and economic crimes of national security.