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The Central Bank of Nigeria (CBN) has issued a stern warning to deposit money banks, cautioning them against engaging in financial market manipulation practices uncovered during an ongoing investigation into the operations of the lender of last resort under the leadership of Godwin Emefiele.
In a recent circular addressed to authorised dealers, the apex bank reiterated its commitment to transparency and the effective functioning of the financial market. Emphasizing the importance of compliance with rules and guidance, especially following the decision to float the naira, the CBN urged market participants to conduct their legitimate businesses transparently.
“All authorised dealers are reminded that the CBN has permitted financial transactions to be conducted under a willing buyers and willing sellers basis, therefore expects prices to be quoted and displayed transparently.”
The official market witnessed a devaluation of the naira by more than 51% on Monday. This move followed the CBN’s caution to banks about underreporting financial market transactions, citing the potential risks of misinformation, price distortions, and market manipulation. The CBN warned of sanctions for non-compliance.
Despite efforts by the Central Bank of Nigeria and the Federal Government to boost liquidity in the foreign exchange market, the significant depreciation of the naira against the dollar has persisted.
The circular revealed that the CBN’s attention was drawn to past practices by banks and other authorised dealers reporting inaccurate and misleading information on transactions in the financial market. The ongoing investigation has exposed instances of underreporting of transaction rates and the use of second cheques in foreign exchange and fixed income markets.
The CBN strongly condemned deliberate attempts to create price distortions by reporting false transaction details, labeling such actions as market manipulation. The circular emphasized that those engaging in such practices would face sanctions.
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