System loopholes: Five banks raked in 145bn in nine months

  • Earnings illegal – Forensic accountants
  • It’s an indication of a distorted economy – Analysts

In spite of several warnings by the Central Bank of Nigeria to commercial banks against illegal dealings in the foreign exchange market, investigations by The Point have revealed that five Deposit Money Banks made over N145 billion over a period of nine months through forex revaluation transactions.
The banks are GTBank, Zenith Bank, Diamond Bank Plc, Union Bank and the United Bank for Africa. A study of the third quarter results of the five banks revealed that they made over 1, 000 per cent gain from forex dealings and transactions in the period under review. The massive profits were attributed to a seemingly unclear currency revaluation policy, called Flexible Inter-bank Policy introduced by the CBN earlier in June this year.
For instance, Diamond Bank made a 1,940 per cent gain from the market as its profit grew from N3.284 billion, within the same period last year, to about N9.654 billion in the corresponding period of this year.
In the foreign exchange revaluation spree, GTB, which had earned N6.774 billion between January and September 2015, made about N93.639billion from forex dealings within the same period in 2016.
Zenith Bank followed closely with its profit increasing by 323.5 per cent. From the N7.324billion made from forex dealings in the first nine months of 2015, the bank’s profit rose to N31.015billion in the period under review in 2016.
In the same vein, UBA recorded a foreign exchange gain of 820.3 per cent, from N706 million in 2015 to N6.497billion in the review period for 2016. For Union Bank Plc, it was a gain of 208.2 per cent, from N1.397billion in the nine months ended September 2015, to N4.306 billion in the corresponding period of 2016.
Apart from the aforementioned Deposit Money Banks, Access Bank, which is also categorised as a Tier 1 bank by market rating, surprisingly sustained foreign exchange losses within the nine months ended September 30, 2016, from N60.027 billion to N9.814 billion. This represented a percentage loss of 511.6.
Analysts, who spoke with The Point on the development have, however, pointed out that the said profit could only have come off a series of financial transactions that had taken advantage of the system and the teeming Nigerians, who stake and trade their life earnings in the forex market daily.

Uba Group

Such transactions, according to the analysts, include creating an artificial scarcity of the dollar, which enables the banks to sell the foreign currency at higher rates, and taking advantage of the huge forex gaps between the official and parallel markets by selling foreign exchange sourced from the CBN at the black market to make gains.

Recall that some of the banks had, in the past, been fingered and investigated by the CBN on issues of round-tripping and taking advantage of the huge forex gaps between the official and parallel markets to make a fortune.


Meanwhile, forensic accountants have expressed the belief that the earnings were not legitimate. For instance, the Managing Consultant, Forensic Consulting, Mr. Ori Adeyemo, said, “What all the banks are doing is round-tripping, which is not healthy for the growth of the economy. The implication of all this is that they are killing the economy and polluting the naira.

Apparently, they will go underground because they are ripping off ignorant Nigerians. Most of the operators in the banking sector are taking advantage of their customers and there is nobody to complain to. Even if you go and complain to CBN, nothing will be done.

“Most of the banks have constitutionalised stealing. The Treasury Single Account has exposed the illiquidity state of the banks. They are totally illiquid and apart from that, there are lots of cases against them in the court. I have several cases of fraud totalling over N1 trillion in several courts in Lagos.”

In another twist, the President, Association of Bureaux De Change Operators of Nigeria, Alhaji Aminu Gwadabe alleged that the banks assigned by the CBN to sell dollars to operators had been failing in their duties. He said that, rather than sell to operators at the official inter-bank rate, they sell to black market operators at prices far above the inter-bank rate.

He said, “The banks involved in dollar sales to BDCs include First Bank, Ecobank Nigeria, Fidelity Bank, UBA and Unity Bank. Others are Diamond Bank, Zenith Bank and Stanbic IBTC Bank. But the BDCs in Port Harcourt, Kano, Abuja, Onitsha, Maiduguri, Benin and Enugu have yet to get a single dollar from these banks because they sell to black market far above the interbank rate.

“Our members have funded their accounts but the banks are not selling to them. The BDCs that met the CBN’s policy guidelines on the disbursement and have been cleared by the banks have yet to receive a dime from the banks. So couldn’t part of the staggering profit have come from these illegal sales?”

Though, a former President, Institute of Chartered Accountants of Nigeria, Mr. Chidi Ajaegbu, said that there was nothing wrong with banks making gains from forex, he opined that fleecing customers was wrong.

Ajaegbu said, “It is obvious they have businesses outside this country. May be these transactions were brokered and they repatriated their profits back home. “

However, the practice is expected to impact on the economy whichever way – negatively or positively. It is just an indication of a distorted economy and there is nothing anybody can do about it. And if for any reason, it went the other way against them, they would have also reported a huge loss.”


Financial analysts, especially capital market operators, said that the dwindling global oil prices led to the foreign exchange crisis, which the banks took advantage of to make such fortune. According to the experts, the only means of solving the foreign exchange crisis is through continuous inflow needed to sustain naira appreciation.

The Managing Director, Cowry Asset Management Company, Mr. Johnson Chukwu, said, for the banks, a lot would depend on the nature of assets on which they put the revaluation gain.

“If it’s their trading assets, when they sell those assets, they will realise the exchange gain,” he said. He explained that this meant that when foreign exchange assets were acquired at lower price, the players would have to revalue those assets to make foreign exchange gains when the exchange rate rises.

Chukwu further explained that for banks like Access Bank that sustained foreign exchange losses, it meant that the bank was not holding open positions or net assets in dollars.


“That means that whatever they have in dollars, they also have in liability. Banks make profit from unrealised gains. This issue may come up for lenders if there is a significant movement in exchange rate by December.

Apart from banks like Access, some consumer goods firms incurred huge forex losses because they got their goods supplied on credit and now that they need to pay suppliers, dollars has gone up and the losses are irreversible,” he said.

In the same vein, the head of vertical market group, Nigeria Interbank Settlement System, Mr Samuel Oluyemi, explained that what the banks gained in the period under review was capital gain. He said that the banks must have sold some of the assets they bought at a lower dollar rate when the dollar value appreciated.

“For instance, when assets are bought at N198 and sold at about N305, they must make gains. This is more about the excess rate thing and it is legal. Take a look at the oil sector, if they do revaluation of pump price per litre from N100 to about N50, some operators would not but suffer losses due to exchange rate volatility,” Oluyemi said.

But another analyst, Mr. Femi Oyetunji, said, “The significant growth was partially attributed to unrealised gains on hard currency assets as a result of foreign exchange movements following the sharp devaluation of the naira.”

He noted that the indirect devaluation of the naira by the CBN was a boom for firms that had dollar reserves while for those that did not but had denominated loans, it was a disaster.

The Managing Director, Highcap Securities Limited, Mr. David Adonri, explained that companies that depended on importation of raw materials when domestic currency dropped were likely to be victims of the disaster.

According to him, companies that are dependent on importation of some of its products tend to suffer more when domestic currency depreciates against foreign currencies. He noted that it was difficult to predict the rate of foreign exchange, describing it as a situation not good for the economy.

“They will need more naira to purchase these products and most of the time, there is scarcity of foreign exchange due to dwindling global oil prices. The exposure to foreign exchange regime had led to foreign exchange losses,” he said.


With the rising naira/dollar exchange rate, the average Nigerian has continued to cry out to the Federal Government, asking for help in salvaging the economy.

A fabric dealer, Mrs. Bosede Ojolowo, who trades in lace materials, reacted negatively to the impact. “Business has been very challenging because the prices of goods in the market have changed due to dollar appreciation against the naira. What we used to buy at the rate of N50, 000 before has skyrocketed to N100, 000. In fact, prices are not stable anymore.

“Worse still, customers don’t want to know. They keep complaining that there is no money, so I decided to sell just little above my cost price. At the end, I am losing part of my profit to dollar exchange when I go to buy again and customers will not be comfortable with changing price tags every week,” Mr. Uchenna Okoro, a shoe importer at Alaba market, Lagos, said.


In a reaction, Access Bank, through its Head, Corporate Affairs, Mr. Abdul Imoyo, has said that the revaluation loss of N54billion resulted from the short foreign currency balance sheet position, which was further contributed to by the naira devaluation. But it noted that the loss had been compensated for by a N96billion gain on derivatives.

However, efforts to get the response of Heads, Corporate Affairs of GTB, Zenith Bank and Diamond Bank, Ms. Oyinade Adegbite, Mr. Victor Adoji and Mr. Mike Omeife, respectively, proved abortive, as the spokespersons refused to respond to mails, text messages and telephone calls of our correspondent.

Meanwhile, the CBN, through its acting Director, Trade & Exchange Department, Mr. W.D. Gotring, vowed to mete out sanctions to erring institutions involved in round-tripping. The apex bank, while cautioning the banks, said that such actions breached extant regulations.

“Authorised dealers are to note that dealing in foreign exchange without appropriate documentation, which includes relevant entries, blotters, physical documents and non-disclosure to the regulatory authorities, is a breach of extant regulations,” he said.