As dollar scarcity worsens in the
country, the inability of parents, whose children school abroad, to
access foreign exchange (forex) is threatening the completion of their
wards’ education.
Although the Central Bank of Nigeria
Governor, Mr. Godwin Emefiele, recently revealed that the apex bank
spent about $2 billion annually on foreign school fees remittances, the
new forex regime appears incapable of meeting such a huge demand any
more..
Average weekly dollar turnover on the
interbank forex market (spot) has dropped to $600 million presently
compared with the $2 billion available as at August last year.
Findings by THISDAY showed that with the
resumption of a new academic session in most schools abroad, a lot of
parents are finding it extremely difficult to purchase dollars from the
interbank forex market, with most of them left with the option of
purchasing the greenback from the parallel market at N423 to the dollar
as at Friday.
The development was further validated by
bank’ returns on forex utilisation for the week ended September 2,
2016, that was published last week, which showed thin forex trading by
the financial institutions. Only few of the banks even sold dollars to
their customers for payment of school fees for their wards abroad.
For instance, the returns of forex
utilisation published by Diamond Bank Plc last week showed that the bank
which is one of the leading financial institutions in forex deals sold
only $918,752 to 18 customers.
Also, First City Monument Bank Limited’s
(FCMB) returns on forex utilisation showed that the bank sold only
$452,918.26 to four of its customers. In the same vein, FirstBank
Nigeria Limited, which sold dollars to a total of 434 customers in the
week under review, did not record any sale to customers for the payment
of school fees abroad.
However, FirstBank sold dollars to
customers for the importation of petroleum products, raw materials,
Bureau De Change (BDC) operators, estacode, personal travel allowance
and business travel allowance.
But Zenith Bank Plc, whose returns of
forex utilisation showed that the bank sold some amount of the greenback
to a few of its customers for payment of tuition fees abroad, recorded
reduced dollar sales in the week under review, which is a reflection of
the scarcity of dollars in the system. Its returns showed that it sold
$28,844,498.05 to customers, as against the about $50 million deals
weekly which it used to report.
The Central Bank of Nigeria (CBN) is still the major supplier of forex in the market.
Nigeria is officially in a recession as
the economy contracted by 2.1 per cent year-on-year in the second
quarter of 2015. The naira has depreciated by an additional 11 per cent
on the interbank forex market since the end of June, with the black
market currently trading at N423/$.
Foreign Portfolio Investment (FPI) in
the country remains weak in the absence of improved forex liquidity at
the interbank market.
Oil prices are down five per cent since
the end of June as activities of militants in the Niger Delta continue
to disrupt oil production with average daily production dropping to 1.51
million b/d in July, one of the lowest production levels for the
country. This compares with the average daily production of 2.15million
b/d in January 2016.
“We are yet to see meaningful
appreciation of the naira in the parallel market since the CBN lifted
its ban on eight commercial banks from the interbank forex market last
week. The announcement of the CBN’s ban on banks sent parallel market
rates above N400/$ for the first time.
“Although there was a reported inflow of
$270 million through Citibank for fixed income transactions last week,
average weekly turnover of $600 million for forex spot transactions on
the interbank market is still a far cry from that of last year August’s
turnover of $2 billion,” a report by CSL Stockbrokers stated.
In its bid to attract foreign portfolio
investments, the CBN recently announced that foreign currency imports in
excess of $10,000 in cash deposited in domiciliary accounts would now
be eligible for investment in the money market (prior to this, such
funds were only eligible for withdrawals).
Meanwhile, as policy makers in the
country continue to search for ways to lift the nation out of its
present state of economic recession, the Chief Executive Officer of the
Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane, has
highlighted ways the economy can state a recovery.
Rewane, who stated this in his monthly
economic news and views for September titled: “Understanding the ‘R’
Words,” that was presented at Lagos Business School recently, listed
stock market crash, currency depreciation, suicide rates, political and
social unrest, widespread banking failure and real estate delinquency as
some consequences of economic recession.
The economist, who pointed out that the
country is in a “mild” recession, stressed the need for government to
target and stimulate aggregate consumption ($340 billion); consumer
confidence (9.5%); gross fixed investment ($66 billion); and
manufacturing index (53%).
He noted that given the fall in oil
revenue, increased deficit financing plan is crucial for recovery, just
as he urged government to borrow between $4-$5 billion externally. In
addition, he advised the government to sell some of its assets and also
issue Eurobond to raise funds.
Furthermore, Rewane called for minimum
wage review as well as social safety net, reduction of interest rates,
reduction as well as refund of banks’ cash reserve requirement (CRR)
with the CBN and to curb the perceived abuse and arbitrage of forex.
“Investor enthusiasm is weak and
recession must be combated with a powerful stimulus package. Doing
nothing will lead to atroplogy,” he added.
In a related development, analysts at
Renaissance Capital (RenCap) have predicted that deposit growth in the
banking system would be further hampered in the second half of the year
as a result of the complete removal of Treasury Single Account (TSA).
The CBN had banned nine banks from
participating in the interbank forex market, due to possession of
Nigeria Liquefied Natural Gas (NLNG) deposits which should have been
remitted into the TSA. This number was estimated at $2.3 billion.
UBA was readmitted into the FX market
the next day and its management explained that there were some
reconciliation issues. Subsequently, the ban on the other banks was
lifted a week after because the banks submitted credible repayment plans
to the CBN.
According to the research and financial
advisory firm, owing to the impact of the naira devaluation year-to-date
loan growth in the first half of 2016 averaged 20 per cent for the
banks, adding that when it adjusted for naira weakness, real loan growth
averaged 2.8 per cent.
But it pointed out that real loan growth
was highest at UBA, Fidelity Bank and Diamond Bank, saying they
recorded real loan growth of nine per cent, 7.4% and 7.0% respectively
as at the end of first half of 2016.
“Real loan growth will likely remain
subdued in this operating environment, and any loan growth that
management teams are guiding for is based largely on the impact of the
naira devaluation. Following inflation of the oil and gas book post
devaluation, total oil and gas exposure increased to 29 per cent of the
total loan book in first half of 2016 from 26 per cent in first quarter
of 2016. Manufacturing and general commerce were the two other sectors
with the highest exposure, representing 12 per cent and nine per cent of
loan book respectively as at first half of 2016.
“However, deposit growth was weak
across the board, despite the impact of the naira devaluation. Only
GTBank, Access and UBA managed to deliver strong nominal deposit growth,
with year-to-date deposit growth coming in at 23 per cent, 17 per cent
and 16 per cent respectively. Real deposit growth averaged three per
cent across the sector,” it added
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