- Market awaits details
- UBA Leads Utilisation as CBN Sells $131m to Banks
The flexible foreign exchange policy of
the Central Bank of Nigeria got a presidential nod again yesterday as
President Muhammadu Buhari said it would help the country’s economy,
which had been badly hit by a slump in oil revenues.
“The central bank has moved to introduce
a greater flexibility in our exchange rate policy. These actions are a
down payment on our people’s ability to succeed,” Buhari said in an
essay he published on the website of The Wall Street Journal. (See back
page for full text)
Although the President did not give
details of the policy, he explained that Nigeria needed it to boost its
supplies of foreign exchange, adding that the country would need to
radically increase its exports and productivity as well as improve the
investment climate and ease of doing business.
The president’s essay could raise more
anxiety about the details of the policy that Thisday reported yesterday
might be unveiled this week. The paper had said its informed analysts
believed the details might be released this Friday, being the day the
CBN receives bids from authorised forex dealers.
Meanwhile, the CBN last week sold
$131,323,071.09 to 11 commercial banks and three merchant banks, the
returns of forex utilisation published by the respective financial
institutions have shown..
However, dollar purchases by Dangote
Flour Mills – $2,444,843; Dangote Sugar Refinery -$1,555,156.62; and
IATA -$1,500,000; which were UBA’s biggest customers during the week
under review, buoyed its performance in forex returns.
Also, with a total of $17,538,818,
Stanbic IBTC came in second. The bank sold the greenback to a total of
147 customers. Out of this amount, 94 of the firms that Stanbic IBTC
sold dollars to were institutional investors and foreign portfolio
investors who were divesting from the country’s equities, bonds and
treasury bills instruments.
FirstBank of Nigeria Limited held the
third position with a total of $14,424,749.46 forex allocation it got
from the central bank. The bank sold the dollars to 788 customers.
FirstBank’s biggest customers were Dangote Cement Plc which purchased
$2,000,000.
Guaranty Trust Bank Plc (GTbank) held
the fourth position with a total of $13,119,712.75, just as Zenith Bank
Plc with a total forex allocation of $13,110,393.04 came in fifth.
Zenith Bank sold the greenback to a total of 496 customers. Also, Zenith
Bank’s biggest customers in the week under review was the Dangote Group
(Dangote Agro Sacks Limited, Dangote Flour Mills and Dangote Sugar
Refinery Plc), which purchased a total of $2,000,000 from the bank.
Also, Standard Chartered Bank Limited
held the sixth position with a total forex allocation of $11,601,339,
Diamond Bank Plc came in seventh with a total forex allocation of
$11,166,213.01, and Ecobank Nigeria got a total forex allocation of
$8,377,592.95 from the central bank to be in the eight position.
Meanwhile, a Bloomberg report indicated
that the banking sector regulator will probably make a pronouncement in a
circular to banks, said a person, who asked not to be identified
discussing the private talks held June 9 in Abuja, the capital.
Analysts including those at Renaissance
Capital Limited have said they expect the central bank to allow the
naira to weaken around a trading band in the interbank market, while
allocating dollars at a fixed rate to industries the government deems
strategic.
The central bank is still working out
details of the policy, the person said, and may also reinstate a minimum
holding period for foreign investors buying naira bonds.
CBN Governor Godwin Emefiele has faced
calls for more than a year to devalue the currency, as other oil
exporters from Russia to Kazakhstan and Angola have done, amid a rout in
crude prices since mid-2014 to around $50 a barrel.
Investment into Nigeria has shrivelled
as foreigners are put off by capital controls needed to defend the peg,
while local businesses have struggled to import raw materials and
equipment.
Naira three-month forwards rose to N301
against the dollar yesterday in London, poised for a record close and
suggesting traders see the currency falling to about that level from the
spot price of N198.5. Forward contracts maturing in a year traded at
N340, also a record high.
Africa’s biggest economy removed a
requirement for foreign investors to hold local-currency debt for at
least one year in mid-2011. That led to Nigeria’s inclusion the
following year in JP Morgan Chase & Co.’s local-currency emerging
market bond indexes, tracked by more than $200 billion of funds, and
also prompted naira yields to plummet.
The country was kicked out of the
indexes last September because JPMorgan said the currency restrictions
made it hard for investors to trade naira bonds.
Nigeria has held the naira at N197-N199
per dollar since March 2015, with Emefiele and President Muhammadu
Buhari both insisting that a weaker currency would leave consumers
facing higher prices. That’s already happened, with inflation
accelerating to an almost six-year high of 13.7 per cent in April. The
statistics bureau is due to announce figures for May this week.
The naira has plummeted to around N365 per dollar on the black market as shortages of the greenback worsened.
The black market rate may strengthen if
the official one is weakened and inflows from investors pick up,
according to the president of the Bureau de Change Operators of Nigeria,
Aminu Gwadabe.
“The naira might trade around N300 to a
dollar on the black market after the announcement, because we expect
supply to improve,” he said, adding that “in the past weeks, the central
bank created doubt in the market, which triggered another round of
speculation.”
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