We support the decision of the Central Bank of Nigeria (CBN) to bar about 16 commercial banks from the Small and Medium-scale Enterprises (SMEs) wholesale window of the foreign exchange market. A statement issued last week by the bank’s Acting Director, Corporate Communications, Mr. Isaac Okoroafor, said that the decision was taken following persistent complaints from SMEs that some banks were deliberately frustrating their efforts to access forex from the window.
The unfortunate attitude of these banks is truly deserving of commensurate sanctions. The CBN said it arrived at its decision based on verified field reports that only eight banks had sold forex to the SMEs segment since the inception of the new window early last month. As a result, the banking regulator ruled that only the eight banks that commenced selling forex to SMEs when the window was opened would be allowed to access forex for that segment of the financial market.
However, the CBN said the sanctions will be lifted as soon as the indicted banks show evidence of significant utilisation of the funds allocated to them under the SMEs window. On the other hand,as an incentive, the banks that demonstrated good faith on the SMEs forex market window were allocated all of the $100 million sold at the window the day the hammer fell on the erring banks. The action of the indicted banks is a clear violation of the CBN directive. The sanction prescribed for their infraction should be faithfully enforced to deter a repeat. Any further breach of the CBN directive on this matter should attract stiffer punishment.
The CBN’s announcement of a forex wholesale window last month had been warmly welcomed as one of the long-awaited measures that would breathe new life into SMEs by facilitating the importation of the finished and semi-finished items they require for their operations. The CBN promised at the opening of the window that it would allocate $20,000 per business per quarter to eligible SMEs. The move was necessitated by the fact that a large number of small businesses were being crowded out of the forex market by large firms. The $20,000 can be effected by telegraphic transfer, subject to completion of Form ‘M’ and supported with proforma invoice and the importer’s Bank Verification Number (BVN).
Under the arrangement, all processing banks are to ensure that the importers submit relevant shipping documents not later than 60 days from the date of the transfer. SMEs that will benefit from the forex window are those with asset base (excluding land) of between N5m and N500m, and a labour force of between 11 and 30. It is important that banks do not allow big businesses to crowd out the small operators which are the main drivers of the economy out of the SMEs forex window.
While we commend the regulator for its action against the 16 banks, it should not take its eyes off the ball. This has become expedient if the current interventions in the forex market are to succeed. The CBN is reported to have injected over $4 billion this year alone to firm up the forex market and stabilise the naira. It should not allow its efforts to be sabotaged by self-serving banks in cahoots with some big businesses.
