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CBN Orders Banks to Transfer NNPC Funds

Posted by By Ayodele Aminu and Mike Oduniyi on 2005/10/31 | Views: 765 |

CBN Orders Banks to Transfer NNPC Funds

The Central Bank of Nigeria (CBN) has directed banks in the country to transfer all funds belonging to the Nigeria National Petroleum Corporation (NNPC) funds in their custody to its account unfailingly by close of work today.

The Central Bank of Nigeria (CBN) has directed banks in the country to transfer all funds belonging to the Nigeria National Petroleum Corporation (NNPC) funds in their custody to its account unfailingly by close of work today.

Group Managing Director of the Corporation, Engineer Funsho Kupolokun confirmed to THISDAY at the weekend that the move was to prevent NNPC fund from being trapped in some weak banks that may not be able to scale through the on-going consolidation exercise in which all banks in the country have been directed to either shore up their capital to a minimum of N25 billion before December 31 or close shop.

Deadline for banks that do not have the financial muscle to raise the N25 billion benchmark on their own to fall into a group that would collectively make up the minimum capital requirement lapses today.

The CBN directive for transfer of NNPC funds to its account was communicated to banks last Friday through a circular dated 27/10/2005. The circular was signed by its Director of Banking Supervision, Dr. (Mrs) Sarah Alade.
Titled “Mandatory Tran-sfer of NNPC Funds From Deposit Money Banks,” the circular states : “In consonance with our monetary policy strategy to contain excess liquidity in the banking system, the President, Chief Olusegun Obasanjo has approved that all NNPC funds with Deposit Money Banks (DMBs) be transferred to CBN with immediate effect.

“Specifically, all NNPC funds in the following accounts Remittance Account, Operations Acc-ount and Asset Replacement (capital account) should be transferred to the CBN not later than Monday October 31, 2005.
“As indicated above deposits in respect of pension funds are exempted from such transfers.

The CBN however, stated that “NNPC will continue to do its banking transactions through a few selected deposit money banks.” It also warned that “any breach of this regulation will attract severe penalty.”

“For the avoidance of doubt, this includes: 1)delay in making remittance. The amount not remitted as and when due will attract an interest rate of Minimum Rediscount Rate (MRR) plus 5 percentage points. 2) Rendition of false reports. Principal Officers of any bank that submits false report will be held accountable,” the statement noted.

Reacting to the development, the NNPC Managing Director, said the movement of the Corporation's funds from banks was to avoid a situation where the money running into several billions of naira, would be trapped in banks that might not scale the CBN recapitalization hurdle.

Kupolokun told THISDAY that the NNPC actually wrote the CBN to take over management of its funds pending the time it would come out with a list of healthy banks.

“I discussed the issue with (Charles) Soludo about which bank is healthy and which is going under. In the end I think it is absolutely necessary that we allow the CBN to manage the funds for us than to allow our money to be trapped in distressed banks,” Kupolokun said.

NNPC funds in banks include income from fuel lifting by major and independent marketers as well as funds for cash call payments for joint venture oil operations.

Already, 11 out of the 18 banks that could not scale through the on-going banking consolidation exercise as exclusively reported by THISDAY yesterday, have merged to form Alliance Bank.

The merging banks namely Afex Bank Plc, Assurance Bank of Nigeria Limited, City Express Bank Plc, Fortune Bank Plc, Liberty Bank Plc, Metropolitan Bank Plc, Eagle Bank, Triumph Bank, Fountain Trust Bank, Societe Generale Bank and Gulf Bank of Nigeria Plc, formally wrote to inform the CBN of their intention to coalesce into a single bank to be known as Alliance Bank before the December 31, 2005 deadline. Modalities for helping these banks are being worked out by the apex bank.

Meanwhile, the sudden withdrawal of these funds has since Friday created tension in the banking industry as banks have started scampering to source for funds to cover their positions.

Although cost of funds – inter-bank funds (rates at which banks borrow from one another to meet their immediate needs) remained relatively stable, last Friday it was obvious some banks, according to THISDAY checks, were yet to receive the CBN directive. Inter-bank rates are however, expected to move up today.

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Comments (3)

Okfold(Sobe, Edo, Nigeria)says...

I want the meaning of female owan name Ekeke (Edo state)

Toluwalase Samuel Olufemi(Ijebu, Ogun, Nigeria)says...

Authority belongs to God, once He decrees it is final and binding

Ikponmwosa Osamede(Edo, Nigeria)says...

Your meaning of Osamede is wrong. Osamede means God has given me a crown