White collar thieves! Some top bankers resort to currency round-tripping to amass obscene wealth and post positive earnings

Real banking has much to do with ideas, ethics, and imagination but in Nigeria, it has everything to do with maneuvers, intrigues, plots, paranoias, betrayals, a great deal of calculation, no little cynicism, and every kind of con game. That is why it’s called smart banking although the nation’s banking system would effortlessly pass as ‘devious’ in saner climes.

Consider the issue of round-tripping for instance; local bank chiefs and their underlings refer to it as creative banking. In truth, it has too little to do with creativity and very much to do with cunning, disloyalty and greed, according to financial pundits.

As you read, prominent bank chiefs in the country are sitting ducks for target practice by the Economic and Financial Crimes Commission (EFCC), following their desperate and illicit plots to profit off the country’s regressive banking and ethical lacuna. As the Central Bank of Nigeria (CBN)’s financial regulations and tight monetary policies continue to restrict commercial banks’ profitability schemes, the yawning gap between the interbank and the parallel market forex rates has created an arbitrage window for Nigerian banks to speculate and round-trip in order to boost their earnings.

The Capital investigations revealed that local bank chiefs are currently involved in foreign currency round-tripping in their desperate bid to amass illicit wealth and post positive earnings in view of the tough regulatory and economic environment.

Foreign exchange round-tripping or arbitrage refers to a process whereby funds are obtained from the official forex market, the CBN to be precise, at lower rates and diverted to the black market for sale at a higher rate.
Consequently, while the naira is sold between N197 and N199 to a dollar at the CBN regulated interbank market, it goes for about N300 to a dollar on the streets of most cities in the country, thereby creating a difference of over N50 per dollar for speculative round-tripping.

The wide differential between the interbank and parallel market was triggered by the CBN’s stricter regulations and currency curbs.

According to a senior official of the CBN, round-tripping and other shady practices by the nation’s bank chiefs causes a huge hemorrhage in the currency market with ripple effects on the country’s scarce foreign exchange reserves. This shady practice, he stressed, cannot continue especially when the foreign currency black market have become a conduit for illicit trade and financial flows.

To curb the illicit practice, the CBN, revealed the officer, is putting together measures to check the activities of local banks’ Managing Directors (MDs), who have been identified as perpetrators of the fraudulent scheme.