The Central Bank of Nigeria (CBN) has issued a stern warning to authorized dealers of foreign exchange (FOREX) to desist from any type of pricing distortion that results in market manipulation, otherwise risk sanctions. The apex bank acting director of the Financial Market Department, Aliyu, M. Ashiru in a recent circular disclosed that the investigation has revealed instances of underreporting of transaction rates and the practice of ‘second cheques’ on foreign exchange and fixed-income transactions.
Also contained in the circular which was issued to all the market dealers, the CBN revealed that it will only allow financial market transactions to be conducted on a “willing buyer, willing seller” basis.
“All Authorised dealers are reminded that the Central Bank of Nigeria (CBN) has permitted financial market transactions to be conducted on a ‘willing buyer, willing seller’ basis, and therefore expects prices to be quoted and displayed transparently”
“The attention of the CBN has been drawn to the practice of authorized dealers (and their customers) in reporting inaccurate and misleading information on transactions concluded in the financial market. Ongoing investigations have revealed instances of underreporting of transaction rates and the practice of second cheques on foreign exchange and fixed-income transactions.
“Deliberate attempts to create price distortion by reporting false transaction details amounts to market manipulation which will not be tolerated and henceforth face sanctions” the Apex Bank noted.
It can be recalled that from its projected $7 billion backlog of verified foreign liabilities, the CBN cleared another $500 million tranche. However, this action did not make much impact as the naira crashed to an all-time low of N1,348.63/$ on the official window and N1,450/$1 in the parallel market presenting a decline of 33.87%.
