The Nigeria Central Bank would not disclose the approved contract sum.
A contract awarded by the Central Bank of Nigeria for the construction of a 'Dealing Room' has raised concerns over the financial management and transparency of the Lamido Sanusi-led central bank.
Analysts say the Central Bank's decision to approve the contract allegedly at about N900 million is "outrageous"; although the apex bank denies the figure.
Sources in the apex bank told PREMIUM TIMES that the contract was awarded by the Central Bank under Mr. Sanusi to construction giant, Julius Berger, for almost N900 million.
The Central Bank admitted that it had indeed awarded the contract for the 'Dealing Room' but claims the amount approved for the contract "is nowhere near" the N900 million. It refuses to disclose the cost of the contract.
A dealing room
A 'Dealing Room' or 'foreign exchange (FX) dealing room', is an electronic trading platform where commercial banks and other foreign exchange dealers in the financial market meet to initiate, trade, price and execute transactions involving foreign financial instruments including bonds and treasury bills.
The Central Bank said it is constructing a foreign exchange dealing room in Abuja as part of efforts to position itself as a central and direct player in Nigeria's foreign exchange market.
The banking sector regulator never had a dealing room but relied on Reuters Dealing 3000 Xtra System and the commercial banks to sell foreign exchange to customers.
The CBN never had one because it largely provided the foreign exchange to commercial banks who sell it to customers. With the apex bank's new policy, it has become a direct player in the foreign exchange market.
"In a dealing room, you have a two-way quote- buy and sell quotes.
"Because it is CBN and it has plenty of liquidiy, the prices it quotes will make the market," a financial analyst said.
"The CBN will in essence become a big player who wants to play according to market rules," the analyst, who did not want his name mentioned, said.
He said being a direct player will make the Central Bank to primarily determine foreign exchange rate in the market.
Apart from the controversy surrounding the cost of the contract awarded by Nigeria's apex bank, another controversy trailing the contract is the allegation that the award did not pass through due process.
The facility, PREMIUM TIMES learnt, is to be constructed within a section of the premises of the Central Bank headquarters in Abuja.
A source close to the CBN said the contract was not captured in the CBN's 2013 budgetary provisions for capital projects.
The Central Bank is one of the government agencies whose budget breakdown does not pass through the National Assembly for approval. It's board, headed by Mr. Sanusi, approves its budget.
Despite the allegations surrounding the contract, the CBN spokesperson, Ugochukwu Okoroafor, will not give its cost.
"Yes, CBN is trying to construct a dealing room, but the cost is no way near the cost being mentioned," Mr. Okoroafor said, refusing to give the official figure. "The CBN manages about $48 billion, being Nigeria's total foreign reserve, a significant portion of which is handled in-house without a dealing room."
The spokesman also denied that the project did not follow due process, saying it would be unthinkable for a big institution like the CBN to carry out such a project without an appropriation in the budget for its execution.
The Chief Executive of Financial Market Derivatives Limited, a Lagos-based financial expert, Abioye Ekundayo, would not comment on the cost of the contract but said it would "appear it on high side" if it was awarded for anything close to N900 million.
He described a Dealing Room as essentially a large room filled with gadgets and computer monitors linked to an internet infrastructure operated by people.
Another analyst described any approval of hundreds of millions of naira for a dealing room as "outrageous."
Nigeria needs it
The Central Bank's spokesperson said the project is in line with the apex bank's commitment to push forward its reform agenda to ensure financial system stability and make Nigeria's financial markets truly global, organised, liquid and diversified.
"No responsible regulatory authority would have that huge portfolio to manage and it allows it in the hands of commercial banks. It is important that the CBN monitors first-hand what is happening at all times.
"The CBN has an obligation to ensure that Nigeria's money is safe. That is why the CBN wants to become a direct player in the FX market," Mr. Okoroafor said.
Mr. Okoroafor said "this is the first time the bank is thinking of building an integrated dealing room where foreign reserve management would be combined with financial market operations, which involve naira and dollars."
He said the facility would be a complex terminal that is fitted with ultra-modern electronic equipment that would operate 24 hours a day with real time access to all the markets in the world, apart from the people that would work in the department.
Analysts agree with Bank
The Central Bank's position on the need for a dealing room was echoed by other financial analysts who described the CBN's decision as necessary.
The Chief Executive of Financial Market Derivatives Limited, a Lagos-based financial expert, Abioye Ekundayo, commended the Central Bank for the initiative, saying as a big player with the huge liquidity level at its disposal, it would want to play by market rule and the FX rates it quotes would positively impact the market.
According to Mr. Ekundayo, the emergence of the Central Bank as a direct primary player in the FX market will make it have a true sense of the market and place it in a better position to make informed policies towards achieving financial market stability.
Our CBN source also agreed on the need for the dealing room.
"In the long term, the CBN's direct dealing will make it have a true sense of the market which allows it to make informed policies," he said