Although the four lenders involved in the MTN saga insist that the huge fines, which the Central Bank of Nigeria (CBN) slammed them with for violating regulations on Certificates of Capital Importation (CCL) wouldn’t affect their day-to-day operations, it is, however, obvious that they were clearly dazed by the apex bank’s action, writes Tony Chukwunyem
In the wake of the Central Bank of Nigeria (CBN)’s announcement, a fortnight ago, that it had fined Standard Chartered Bank, N2.4 billion, Stanbic IBTC, N1.8 billion, Citibank, N1.2 billion and Diamond Bank, N250 million for allegedly assisting telecoms giant, MTN Nigeria Communications Limited, to illegally move $8.13 billion abroad, there were some speculations that the fines were too severe and that the apex bank would reduce them.
In fact, following the public announcement of the fines, the four lenders had separately issued statements, indicating that they were prepared to engage with the regulator to resolve the issue
Specifically, in its statement, Citibank Nigeria Limited said: “Citibank Nigeria Limited (Citi) recently received a letter from the Central Bank of Nigeria (CBN) imposing sanctions on Citi for alleged breaches of foreign exchange regulations in respect of foreign exchange remittances done on behalf of a customer, MTN Nigeria Communications Limited.
“Citibank Nigeria Limited has sent a detailed response to the CBN addressing the serious allegations made in the CBN letter. Citibank Nigeria Limited remains committed to complying with all extant foreign exchange rules and regulations of the Federal Republic of Nigeria.”
Similarly, Standard Chartered Bank, in a statement, said: “As previously disclosed, we are committed to fully co-operating with the regulators on this matter. Whilst we cannot provide additional information due to ongoing engagement with the regulators, we look forward to a rapid resolution and satisfactory outcome of this matter.”
However, any hope of reduced penalties for the banks was dashed last Wednesday when Stanbic IBTC and Diamond Bank wrote to inform the Nigerian Stock Exchange (NSE) that the CBN had debited the amounts of the stated fines from their accounts with the apex bank.
For instance, in its letter, signed by the Group Company Secretary, Chidi Okezie, and Ag. Head, Marketing and Communications, Bridget Oyefeso-Odusami, Stanbic IBTC stated in part: “Following our earlier announcement to the Nigerian Stock Exchange on 30 August 2018, in respect of the penalty of N1.886 billion imposed by the Central Bank of Nigeria on our banking subsidiary – Stanbic IBTC Bank PLC in relation to the remittance of foreign exchange on the basis of certain capital importation certificates issued to MTN Nigeria Communications Limited, we write to update the NSE that the CBN has debited the account of our banking subsidiary with the CBN for the full amount of the above stated fine advised to the bank.”
The lender reiterated its position that it breached no extant laws relating to Certificates of Capital Importation (CCI) executed on behalf of MTN.
“Stanbic IBTC Holdings PLC, as well as our banking subsidiary, maintain our position on this matter, which is the fact that the Bank has done nothing illegal and accordingly the bank will continue to provide CBN with documents and details in support of our contention that our actions in relation to these transactions were not illegal,” it said.
The company reassured its stakeholders that the debit would not impact on its capacity to handle clients’ requests or clients’ ability to continue to carry out viable business transactions with either the bank or any member of the Stanbic IBTC Group.
“Our business transactions will continue to be handled professionally and in a manner that is aligned with Nigeria’s laws and regulatory guidelines,” it stated.
Although Standard Chartered and Citibank did not issue any statement to confirm that their
accounts with the CBN had also been debited with the stated fines, reliable sources at the apex bank confirmed that the funds had been deducted from the lenders’ accounts.
Impact on lenders
The development has sparked reactions from major stakeholders in the financial sector, with shareholders of Stanbic IBTC and Diamond Bank especially, wondering how it will affect the payment of dividend by the Tier 2 lenders.
In a chat with New Telegraph, President, Constance Shareholders Association of Nigeria, Alhaji Shehu Mikail, said that there was possibility that the dividend the affected banks are going to pay if any will fall short of expectations.
“I believe that the return on the investment, especially from Stanbic IBTC,66666 will not be what we were earlier expecting. But for Diamond Bank, I don’t think any dividend will be paid because before this development, the b6ank was already having issue as regards non-performing loans.
“The fine is likely going to reduce dividend for shareholders, however the penalty is a welcome development. CBN wants to ensure that banks comply with forex transaction policies. It will serve as a warning to others to always comply with the rules,” he said.
Stan Chart’s second major forex infraction in two years
Analysts point out that shareholders of Standard Chartered Bank will also be particularly concerned about the CBN’s sanctions since this is the second time in about two years that the British multinational banking and financial services company is being sanctioned by the CBN for violating the country’s foreign exchange regulations.
In November 2016, the CBN reportedly fined the lender about N2 billion for foreign exchange infraction.
Apart from the huge fine, the commercial bank’s treasurer was also said to have been suspended by the CBN, which at the time was struggling to curb unethical practices of some banks that were negatively impacting naira stability.
Significantly, commenting on the implications of the latest sanctions for Standard Chartered and Citibank, the Head of Treasury at Ecobank Nigeria, Olakunle Ezun, was quoted by a national newspaper as saying that: “Standard Chartered Bank will inform the London Stock Exchange about the fine while Citibank Nigeria will report the fine to the New York Stock Exchange and will appear in their parent body’s financials for the year. Overall, the fine will affect the banks’ profit for the year and what will be available for shareholders’ sharing will reduce.”
It would be recalled that Standard Chartered Bank’s December 2017 results show that it recorded profit before tax of $3 billion, a 175 per cent increase compared with the previous year’s figure and up 71 per cent excluding principal finance.
Little effect on capital importation by lenders
Interestingly, analysts don’t expect the development to affect the leading position that lenders such as Stanbic IBTC, Standard Chartered and Citibank are occupying in the Nigerian banking industry with regard to having the highest share of foreign capital flowing into the country every quarter.
For instance, latest data recently released by the National Bureau of Statistics (NBS) show that Stanbic IBTC was the financial institution through which the highest share of foreign capital flowed in the second quarter of this year with 54.9per v cent of the total capital inflow, showing a slight increase from 48.5per cent recorded in Q1 2018.
It was followed by Standard Chartered Bank, CitiBank, Access Bank, Zenith Bank, and Guaranty Trust Bank. The six banks jointly accounted for 90per cent of the total capital Imported into the country in Q2 2018.
NBS data for the fourth quarter of 2017 had also indicated that the bank through which the highest share of capital was imported was Stanbic IBTC Bank plc, which accounted for 50.7 per cent ($2,730 billion) of the total share, up from the 40.2 per cent share recorded in the third quarter of 2017.
Again, the lender was followed by Standard Chartered Bank, which accounted for 15.1 per cent share or ($811 million) of capital importation.
The top five banks through which capital was imported during that period were Stanbic IBTC bank, Standard Chartered Bank, Zenith Bank, and Citibank Nigeria Limited, and Access bank plc, all accounting for 87 per cent of capital importation in the fourth quarter of last year.
However, as the Chief Executive Officer of Fairweather Associates Limited, Mr. Denis Okoro, pointed out, even if foreign owned banks like Standard Chartered and Citibank Nigeria are able to take the CBN fines in their stride, the management of both financial institutions will still have to convince their board of directors that they did enough to prevent the CBN hammer from dropping on them.
He said: “The way these organisations operate is that when things like this happen, unless the management can convince the board beyond any doubt that they bear no responsibility for the CBN action, they will also suffer some consequences.”
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