CBN approves categorised sanctions for erring banks on NEMSF

Sarah Alade, Deputy Governor, CBN

The Central Bank of Nigeria (CBN) has approved a sanctions grid (categories of penalty) to Deposit Money Banks (DMB) that participates under the Nigerian Electricity Market Stabilization Facility (NEMSF).

The CBN initiated a N213billion Nigerian Electricity Market Stabilization Facility (CBN-NEMSF) as a follow up to commitments it reached with other stakeholders to address debts owed by generating companies to gas suppliers.

In a circular to all DMBs signed by the Director, Financial Policy and Regulation Department CBN, Kelvin Amugo, and obtained from its website on Monday, the apex bank said it approved the sanction grid to ensure compliance with the terms and conditions of the facility.

According to the apex bank, where collection Banks fails to provide the Refinancer with a register of all accounts operated by a DISCO and domiciled with it or fails to disclose all existing Feeder Collection Account in respect of each Distribution Companies (DISCO) in accordance with the terms of the Accounts Administration Agreement, the DMB shall pay a penalty of N10 million.

The DMBs shall accordingly, “provide the information within 2 working days and further  infraction will lead to termination of the DMB’s participation as a Mandate Bank.”

It also warned that if a bank closes a Transaction Account without the prior written consent of the Refinancer, its penalty will be N 2 million and a second infractions will lead to termination of the DMB’s participation as a Mandate Bank.

It noted that “Sanctions that may be imposed are not limited to those listed, and the Central Bank of Nigeria may impose additional sanctions, and in such form as it may deem fit including regulatory action against officers of defaulting Deposit Money Banks; and (ii) Any penalties imposed as a result of sanctions may be directly offset against any fees payable to a Deposit Money Bank under the CBN-NEMSF.”

Furthermore, the CBN warned that late or non-remittance of repayment sums due under the CBN-NEMSF and held by the Collections Banks and the Principal Collection Bank in breach of the provisions

of the NEMSF Transaction Documents, will lead to, a penalty of N2 million and “shall be instructed by the Refinancer to immediately transfer the funds into the PCA with interest at the Bank’s maximum lending rate for the number of days the infraction persist.”

The CBN in May, said a total of N120 billion out of N213 billion Nigerian Electricity Market Stabilization Facility has been disbursed in four tranches. CBN Governor, Godwin Emefiele disclosed this during the disbursement of the fourth tranche of N55.45 billion to power companies in Lagos.