The Central Bank of Nigeria (CBN) has announced its intention to pursue legal action against entities found to have violated foreign exchange (FX) forward contract rules. This follows the completion of a forensic audit conducted by the global consulting firm Deloitte, which was commissioned by CBN Governor Olayemi Cardoso. The audit targeted transactions under the Retail Secondary Market Intervention Sales (SMIS), with a specific focus on undelivered FX forward contracts.
The audit involved thorough verification processes, including examination of contract documentation, import/export forms, trade confirmations, shipping and customs records, and compliance with CBN regulations. The primary goal was to identify any irregularities and ensure only eligible and genuine counterparties were involved in these contracts.
According to the CBN, the audit uncovered serious irregularities, such as discrepancies between company names on approval documents and official forms, sales exceeding demand, importation of non-permissible items, unauthorized entities participating in restricted imports like milk, and vague descriptions of goods. Some FX sales were even approved for blank or rejected applications, or were valued higher than the cost of the goods being imported.
In response, the CBN cancelled contracts deemed invalid based on clear audit evidence. The apex bank stated that under Nigerian law, FX settlements cannot proceed where contracts are marred by illegality or misrepresentation. No FX payments were made for such contracts, and any naira deposits from counterparties for these deals have been refunded. The CBN emphasized that paying out on these contracts would have encouraged abuse and drained the nation’s foreign reserves.
To ensure accountability, the CBN is collaborating with law enforcement and regulatory agencies to consider civil, administrative, or criminal charges against offenders. The bank stressed that the audit process was independent, thorough, and procedurally fair, and therefore, its findings are final and cannot be appealed. The apex bank reiterated its responsibility to uphold market integrity and safeguard Nigeria’s financial system from abuse and fraud.
Source: Punch