The Nation Newspaper

Tag: forex

  • $14.1b forex deals attract investors

    $14.1b forex deals attract investors

    Foreign investors’ confidence in the economy is rising. The feat is attributed to the $14.1 billion combined foreign exchange (forex) deals from the Investors’ & Exporters’ FX Window – I&E FX Window- and the Central Bank of Nigeria’s (CBN’s) weekly dollar interventions, The Nation has learnt.

    The I&E FX Window has since April attracted $7.6 billion foreign investors’ cash into the economy. The CBN has injected nearly $6.5 billion into the economy within the period to settle forex obligations mainly at the retail end of the market.

    Last week, the CBN, in its drive to sustain the improved dollar liquidity, injected $100 million into the Secondary Market Intervention Sales (SMIS) for spot and short tenored forwards not exceeding 60 days.

    The forex rates across all segments traded within a tight band. At the official market, the naira opened at N305.70/$1 and closed at N305.80/$1 due to daily interventions by the CBN. Similarly, the domestic currency traded flat at the parallel market, closing at N370/$1 all through the week.

    However, at the Nigeria Autonomous Foreign Exchange Market (NAFEX) segment, rate appreciated on all trading days, opening at N360.66/$1 and closing at N359.25/$1, which represent a 0.4 per cent appreciation week-on-week.

    Analysts expect rates to hover at current levels this week as the CBN continues its drive to deepen liquidity via Wholesale and Retail markets interventions in various segments.

    The I&E FX window, also called willing-buyer, willing-seller window, allows foreign investors to find buyers for their dollars at a mutually-agreed price. The CBN controls about 15 per cent of all the transactions carried out in the window.

    Both the I&E FX Window and CBN’s intervention’s cash, the National Bureau of Statistics (NBS) quarterly capital importation report for the second quarter said, led to improved investor confidence in the economy as well as better macroeconomic condition.

    It said the economy has witnessed improvement in capital inflows, as  total capital inflows surged 97.3 per cent quarter-on-quarter to $1.8 billion from $0.9 billion in the prior quarter and improved 72 per cent year-on-year from $1 billion in the second quarter of last year.

    Foreign Portfolio Investment (FPI) accounted for the largest proportion (43 per cent, $0.8 billion) in the second quarter , followed by Other Investments (41.7 per cent, $0.7 billion) and Foreign Direct Investment (15.3 per cent, $0.3 billion).

    By sectoral contribution, inflows classified as Shares (52 per cent, $0.9 billion), Oil & Gas (10.6 per cent, $0.2 billion) and Telecommunication (9.7 per cent, $0.1 billion) attracted the bulk of capital inflows.

    Afrinvest West Africa Limited Managing Director Ike Chioke is not surprised by the jump in foreign inflows, given the recent development in the FX market, particularly the launch of the I &E FX window in April.

    “The largest volume of foreign inflows was recorded in May, underlining the positive impact of FX market transparency and flexibility on investor confidence. The knock-on effects of strong portfolio flows are already evident in performance of the domestic equities market which has historically been driven by FPIs,” he said.

    He explained that investors took advantage of the erstwhile attractive valuation of the market, driving the benchmark index year-to-date return to 36.4 per cent as at August 25, from a negative position of -6.2 per cent in the first week of April.

    He said the impact of the increased foreign inflows was also evident in real sector performance, as Manufacturing Purchasing Managers’ Index (PMI) readings for all the months in the second quarter of this year showed expansion in the sector.

    Chioke said that despite the broad-based nature of rekindled confidence in the economy, the recovery is still fragile.  Sustaining such the recovery in the short term would require the I & E FX window remaining flexible. He said any moves to distort the current operations/flexibility of the window could lead to a repatriation of funds.

    The Afrinvest chief also confirmed in an emailed report that since the launch of the I & E FX Window in April, the turnover of transactions in the window has exceeded $7.6 billion adding that its key attraction remains that rates are market determined.

    He said the improved FX liquidity is broadly driven by spate of FX intervention by the CBN – which has been bolstered by relatively stable oil prices and improved production volumes. Thus, we expect investors to continue to watch the two variables in taking investment decisions.

    On the equities, as the earnings season draws to a close, performance of the benchmark index was mixed last week as the All Share Index (ASI) rose on three of five trading sessions.

    Also, the last of Tier-1 lenders yet to release first half 2017 results submitted audited financials with better than expected performance reported across earnings metrics.

    Nonetheless the impressive results from the Tier-1 banks, the All Share Index ended the week in the red, down 0.7 per cent week-on-week  while year-to-date gain moderated to 36.4 per cent. Also, market capitalisation fell by N94.5 billion to settle at N12.6 trillion.

  • Report: 60% forex allocation ‘ll boost manufacturing

    The Central Bank of Nigeria’s (CBN) preferential allocation of foreign exchange (forex) to the manufacturing sector was short-lived and fraught with controversies, but the initiative hugely boosted the sector during the period, a report has said.

    The report, which was accessed by The Nation, was contained in the executive summary of the Manufacturers Association of Nigeria’s (MAN) Economic Review of the second half of last year, which showed a 9.54 per cent increase in capacity utilisation from 49.64 per centin the second half of 2015 to 59.18 per cent in that of 2016.

    Although the report said the initiative, which began in August, 2016, came to an end in February 2017, it attributed the increase to the 60 per cent preferential forex allocation to the sector for importation of raw materials and machinery not locally available.

    According to the report, “Capacity utilisation averaged 51.74 per cent in 2016, as against 50.17 per cent of 2015, indicating a 1.57 percentage point increase over the period.”

    A further analysis of capacity utilisation based on sectors also showed that it increased in the entire sectoral groups in the period under review.

    “Capacity utilisation in  Food, Beverage and Tobacco group  increased to 60.3 per cent in the second half 2016 from 53.7 per cent recorded in the corresponding half of 2015, thereby indicating 6.6 percentage point increase in the period. It also increased by 10.5 percentage point when compared with 49.8 per cent recorded in the preceding half.

    “Textile Apparel and Footwear (group) increased to 56.9 per cent in the period under review from 52.7 per cent recorded in the corresponding half of 2015, indicating 4.2 percentage point increase over the period. It also increased by 15.3 percentage point when compared with 41.6 per cent recorded in the preceding half,” the report added.

    Analysis across MAN industrial zones also showed that capacity utilisation increased in Rivers, Ikeja, Apapa, Kasno Bompai, Ogun and Kaduna zones. In Ogun Zone, for instance, capacity utilisation increased to 68.0 per cent in the period under review from 59.5 per cent recorded in the corresponding half of 2015, indicating 8.5 percentage point increase over the period.

    It also increased by 17.8 per cent when compared with 50.2 per cent recorded in the preceding half.

    According to the report, total production volume in the sector equally increased to N8.38tr as against N7.71tr in 2015, indicating N0.67tr or 8.7 per cent increase over the period.

    Manufacturing investment during the period stood at N448.94bn, out of which N313.62bn or 69.9 per cent went to Ogun Zone.

    The impact extended to job creation; 10,061 jobs were created in the manufacturing sector in the second half of 2016 as against 9,393 jobs created in the corresponding half of 2015. This indicated an increase of 668 jobs over the period.

    At the end of 2016, an estimated 1.63 million historical cumulative jobs were created in the sector, the report said.

    Food, Beverage and Tobacco sectoral group was said to have accounted for most of the jobs created with 2,947 jobs.

    The report noted, however, that a total of 4,408 jobs were lost during the period as against 12,400 jobs lost in the second half of 2015.

  • CBN: Forex monthly demand jumps to N588b

    CBN: Forex monthly demand jumps to N588b

    The demand for foreign exchange (forex) has continued to rise despite the drop in forex earnings by the Federal Government, it was learnt yesterday.

    Central Bank of Nigeria (CBN) Governor Godwin Emefiele said yesterday that the average monthly import bill rose from N12.4 billion in 2005 to N588.1 billion in the first five months of this year.

    Speaking in Lagos at the 2017 Annual General Meeting of the Nigerian Bar Association (NBA), Emefiele said the import bill rose despite the significant reduction in inflow of dollars, caused by the sharp drop in oil prices.

    He said the CBN witnessed a significant decline in forex inflow and reserves from about $42.8 billion in January 2014 to about $23.7 billion in October 2016 before recovering to slightly over $30 billion today.

    Acccording to him, in terms of inflow,  the bank’s forex earnings fell from as high as $3.2 billion monthly sometime in 2013 to as low as $580 million per month at some point.

    Although Emefiele did not give reasons for the rise in the import bill, it may not be unconnected with Nigerians’ love for imported goods or increased production in the manufacturing sector.

    “Despite these outcomes, the demand for forex has risen significantly. For example, in 2005 when we had oil prices at about $50 per barrel for an extended period of time, our monthly average import bill was N12.4 billion. In stark contrast, the average import bill in the first five months of 2017 is about N588.1 billion per month,” he said.

    He said the combined effects of the aforementioned exogenous shocks, especially the fall in oil prices and the capital flow reversals due to monetary policy normalisation in the United States, compelled several depreciations of the Dollar-Naira Exchange Rate.

    He said the negative effect of high inflation and exchange rate volatility have prompted the CBN to tackle both developments head-on.

    He noted that high inflation hinders economic growth and is not only harmful to growth in the long run, it discourages saving and inhibits planning and investment as people become more skeptical on the direction of prices of goods and services.

    Emefiele, who spoke on the theme: “The dilemma of monetary policy during a recession: Potential Options for Nigeria”, said achieving low inflation is a major priority of the CBN, adding that any decision it takes on the economy usually has certain repercussions.

    He said the naira depreciated from $1/N155 in June 2014 to as high as over $1/N500 in the parallel market around February 2017 adding that the country is also dealing with the perennial problem of high interest rates in Nigeria. The naira exchange rate against the dollar has however improved after the CBN introduced the Investors & Exporters forex window.

    “If we had chosen to reduce interest rates and increase money supply, we would have further deepened the recession, while assuring foreign investment outflows which would worsen foreign exchange reserves accretion,” he said.

    He said faced with the need to tackle high inflation, the correct monetary policy would be to tighten money supply either by increasing the Cash Reserve Requirement (CRR) of banks, mopping up money through increased Open Market Operations, or raising the Liquidity Ratio of Banks.

    However, while doing any or a combination of these would help moderate inflationary pressure, it could ensure that interest rates remain high and may even be inimical to restoring economic growth in the short term.

    However, if the CBN were to abandon its pursuit of low inflation and decide to implement expansionary Monetary Policy to engender rapid economic growth, the outcome for inflation would be much worse. He said expansionary monetary policy would require reducing the CRR and Liquidity Ratios and increasing money supply through purchase of Bonds and Treasury Bills.

    The CBN has maintained a tight monetary policy to contain rising inflation and encourage forex inflow into the country.

    “Although we made some progress from these initial policies, the pressure on the forex markets continued to swell. With the rate at N197/$1 and the premium vis-a-vis the unstructured markets widening, there were indications that autonomous forex suppliers were hesitant as they perceived the pricing to be inappropriate,” the CBN boss said.

    He said the introduction of a more flexible exchange rate regime with a view to eliminating forex market pressure, buoy autonomous forex inflows, and preserve the forex reserves. Also, to support small-scale users and encourage increased forex inflow from diaspora remittances, the Bank undertook the licensing of International Money Transfer Organisations (IMTOs).

    “More importantly, however, in order to further extricate the lingering bottlenecks, increase transparency and boost supply in the forex market, the CBN, in April 2017 introduced the special Investors’ and Exporters’ (I&E) FX Window. The establishment of that special (I&E) window has tremendously facilitated market driven transactions and has catered for the FX needs of investors and exporters. As a result, we have seen an appreciably improved FX supply due to the introduction of the window,” Emefiele said, adding that  $4.7 billion of foreign exchange inflow had been recorded through this window since April 2017.

    He said he was unaware of the seeming unpopularity of some decisions taken by the CBN.

    Developments in the international oil market exposed the fundamental vulnerabilities of oil exporting countries, such as Nigeria, as commodity exporting countries generally endured unfavorable conditions.

    “We saw the average price of crude oil fall by nearly 60 percent from $114 per barrel in June 2014 to $28 per barrel in February 2016, before recovering to about $50 per barrel today. These resulted in a dwindling of our overall economic fortunes, as net inflows tapered and pressures escalated in critical financial markets,” he said.

    He said available data indicated that Nigeria’s Gross Domestic Product (GDP) contracted by 1.6 per cent in 2016 compared with a growth of 6.2 per cent in 2014, and 2.8 per cent in 2015. Also, within this period, the economy, he said, witnessed sharp increases in inflation rate, reflecting supply constraints, exchange rate depreciation, and adjustments to energy prices.

    Emefiele said inflation rate rose persistently from 9.2 per cent in July 2014 to 18.7 per cent in January 2017.

     

  • BDCs lose ground to banks in forex sales

    BDCs lose ground to banks in forex sales

    More than 700 Bureaux De Change (BDC) operators are inactive in the Central Bank of Nigeria’s (CBN’s) Forex Window as forex end users embrace commercial banks, The Nation has learnt.

    The preference for commercial banks followed the uncompetitive rate regime that shifted the business patronage in favour of the lenders. The practice has cut BDCs’ turnover, putting their businesses under threat.

    Confirming the development at the weekend,  Association of Bureaux De Change Operators of Nigeria (ABCON) President Aminu Gwadabe said the BDC business had been badly affected by the uncompetitive rate as the CBN sells dollars to BDCs at higher rate compared to what the regulator sells to commercial banks, yet both institutions target the same market segment and customers.

    On the CBN’s approved list, 3,389 BDC operators have been licensed and are expected to get $40,000 weekly from the CBN Forex Window. The apex bank disburses about $135.5 million to the 3,389 registered BDCs weekly to sell to forex end users. The funds are for Personal Travel Allowances (PTA), Business Travel Allowances (BTA), medical needs and school fees.

    The BDCs, Gwadabe said, buy dollar from the CBN at N360/$1 and sell to end users at N362/$1 while the regulator sells to commercial banks at N358/$1 and the banks sell to end users at N360/$1.

    Gwadabe described the buying rate for the BDCs as “uncompetitive” and “a big disincentive for many forex users to patronise the operators. He said the banks and the BDCs service the same market segment, they should get dollars at the same rate to enable both institutions compete favourably.

    According to the ABCON boss, the banks enjoy a large customer base with the customers having their accounts debited to cover the cost of purchase. Such convenience plus a lower rate put the banks at an advantage position to attract more customers than BDCs, he said.

    He lamented that BDCs are not only buying at exorbitant rate, but also sell at a rate higher than that of the banks, hence creating low patronage for the operators.

    Gwadabe advised the CBN to review the rate at which the dollar is sold to the BDCs to boost the recovery of the naira against dollar. The naira has remained at N368/$1 at the parallel market in the last one week, a major improvement from N520/$1 it exchanged last February.

    He said the success recorded by the CBN in stabilising the naira was largely contributed by the BDCs, which remain backbone of the retail forex segment of the economy.

    “The CBN should be proactive enough to quickly review the BDC buying rate to ensure effective competition among all the stakeholders. There is no need to give the banks undue advantage over the BDCs as is currently the case based on the level of disparity seen in the dollar buying rate by both sectors. Nothing stops the CBN from ensuring that both the banks and BDCs buy dollars at same rate,” he stressed.

    Gwadabe said the rate challenge faced by BDCs, if not checked, would trigger a liquidity crisis that may derail the ongoing recovery of the naira against the dollar. He said the BDCs will continue to support CBN’s determination to stabilise  the exchange rate, and strengthen the value of the local currency.

    Gwadabe also called on the CBN to increase the volume of Personal Travel Allowances (PTAs) from $4,000 to $8,000; Business Travel Allowances (BTAs) from $5,000 to $10,000; school fees from $5,000 to $20,000 and medicals from $5,000 to $15,000 quarterly to deepen liquidity in the market.

    Gwadabe praised the CBN for liberalising the forex market and making more dollars available, adding that making the funds readily available in right volumes will double the positive impact of the policies on the economy.

  • ‘CBN’s forex policy killing construction’

    •Surveyors canvass use of local materials

    Except urgent measures are taken to encourage the use of local building materials, the construction industry will remain in doldrums, stakeholders have said.

    They spoke at the ninth Annual Distinguished Lecture of the Nigerian Institute of Quantity Surveyors (NIQS), Lagos Chapter.

    At the lecture themed: “Foreign exchange problems, prospects and solutions in Nigeria: Construction industry perspective,” participants called for the use of local building materials.

    The guest lecturer, Henry Boyo, in his presentation, titled: “For the successful resolution of oppressive contradictions in Nigeria’s economy”, said: “It is appalling that the country has become so poor, despite her abundant human and material resources.”

    He said the distress in the economy, based on available evidence, is  a function of “too much money supply,” of the naira, and foreign currencies.

    Boyo said the Central Bank of Nigeria’s (CBN’s) failure to manage an “irrepressibly” surplus naira supply has continued to stimulate a higher inflation rate for several years. This, he explained, has serious consequences on the purchasing power of the persons whose incomes are in naira.

    He emphasised that the naira and the economy would remain stagnant as long as the CBN persistently auctions the dollar against the naira in a market that is suffocated by excess naira supply, created by the apex bank’s unilateral substitution of naira allocations for distributable dollar-denominated revenue.

    “Thus, CBN’s forex interventions are, in fact, deliberate and a suicidal approach to gradually kill the naira, since the CBN would consciously sell its dollar stock for higher naira bids in such auctions. In this situation, the banks flourish, while the rest of the economy wrestles with deepening poverty,” Boyo said.

    The Lagos NIQS Chairman, Mr. Bamidele Mafimidiwo, agrees with Boyo on the effect of foreign exchange (forex) on the industry.

    He explained that the lingering forex problems had caused a huge disruption to businesses in the sector, a situation that has been compounded by the recession. This has grounded new construction projects, leaving builders and suppliers in difficult financial positions, he added.

    To transform the economy and boost industrial activity, Mafimidiwo said there was the need to restructure the monetary framework.

    “Construction, housing, infrastructure, manufacturing, mortgage and other business activities of tangible output represent the construction industry and today’s forum is to provide a platform to x-ray the industry vis-a-vis the meltdown effects and chart a way forward for the sector,” he said.

    Yet, other stakeholders are convinced that the use of local materials for construction projects is the easiest way out of the scathing effect of forex on the sector. This position was shared by a former President of NIQS, Mr. Oluwasegun Ajanlekoko. He said with the use of local materials, importation would be reduced to the barest minimum.

    “It is about time we stopped using blocks when it comes to affordable housing.  We have large reservoir of clay and that is far cheaper, durable and more environment friendly. To solve the problems of exchange rate, we are appealing to CBN to give discretionary interest rates to those in the construction industry,’’ he said.

    Similarly, Executive Director, UACN Property Development Company Plc (UPDC), Yemi Ejidiran, said the forex challenge affected Grade A and B residential projects. “The government should encourage production of most of our finishing materials locally.  We also need to come up with efficient designs, as it is clear that banks are not ready to finance any real estate project,” he said.

  • Bank-to-bank forex deals resume

    Bank-to-bank forex deals resume

    Banks can now directly sell foreign exchange (forex) to one another, without prior Central Bank of Nigeria (CBN) approval, The Nation has learnt.

    The policy shift became exigent following the improvement in forex supply to key segments of the market, a development that has shored up market confidence.

    A top manager in one of the Tier-1 lenders, who disclosed this at the weekend, said the CBN had in the heat of the forex scarcity stopped commercial banks from selling foreign exchange to one another, unless they had its approval.

    But the regulator has in the last few weeks reversed the policy. It now allows lenders to sell foreign exchange to one another. But there is a condition:  ”In bank-to-bank forex deals, the buying bank must not resell to another lender, except to end-users”.

    The source, who spoke anonymously because she was not supposed to disclose such development to the public, said: “The CBN has lifted restrictions on banks not to sell forex to one another except it is approved by the regulator. Today, banks can sell forex to one another, but the buying bank cannot resell to another lender, except to an end-user”.

    According to the source, the CBN has since January, spent over $7.7 billion to stablise the forex market. The Investors’ & Exporters’ FX Window currently records about $80 million daily turnover, with the CBN contributing about 15 per cent of the transactions.

    The Investors & Exporters Forex Window was introduced by the CBN on April 24. About $3.83 billion has been traded through the window since inception. The window has impacted positively on the naira. The window, where buyers and sellers are free to agree an exchange rate, was introduced to attract foreign investors and boost the supply of dollars.

    Traders said $407 million was traded last week as against $354.8 million in the previous week, indicating a gradual return in investors’ confidence in the forex market.

    There has been continuous improvement in dollar inflow into the market from offshore investors, a trend that has also reflected in the volume of transactions at the equity market. Before the window came on board, the CBN was the main supplier of hard currency on the interbank forex market, after foreign investors fled naira assets in the wake of an oil price slump in 2014.

    Aside establishing the Investors’ & Exporters’ FX Window, the CBN also opened a special forex window for SMEs. The window, which allocates $20,000 per business per quarter, helps the SMEs import “eligible finished and semi-finished items” needed for their businesses. The CBN said the bank’s special intervention was necessitated by its findings that many SMEs were being crowded out of the forex space by large firms.

    “The sum of $20,000 per SME customer per quarter can be done through telegraphic transfer, subject to completion of Form ‘M’ supported with a pro forma invoice and the importer’s Bank Verification Number (BVN),” it said.

    All the processing banks are to ensure that the importers submit shipping documents not later than 60 days from the date of the transfer.

  • Forex reserves dip to $30.25b as CBN issues N32b debt

    Forex reserves dip to $30.25b as CBN issues N32b debt

    The Nigeria’s foreign exchange reserve stood at $30.25 billion by June 28, down by 0.36 per cent from a month ago, Central Bank of Nigeria (CBN) data showed last Friday.

    The reserves showed a 14.8 per cent rise from a year ago, when they stood at $26.34 billion. The  dollar reserves have risen slightly this year, thanks to the rise in global oil prices.

    The Organisation of Petroleum Exporting Countries (OPEC) member country has added $4.2 billion to its reserves since the beginning of the year. Foreign reserves stood at $26.09 billion at the beginning of the year.

    The foreign exchange reserves rose by $7 billion in six months to hit $31 billion at the end of April. According to FBN Capital Research, the reserves rose after the disbursement of $600 million by the African Development Bank (AfDB) last November and the recent sale of N1.5 million Eurobond.

    “There has also been a significant recovery in oil production over the period. With less certainty we can speculate about improved forex management and possible swap transactions,” it said.

    The research firm said the positive surprise was due to the upward swing in reserves, since the CBN stepped up its forex sales in early March.

    “The steady accumulation makes it less, not more, likely to adopt the forex reforms sought by the market. There is no sign that the CBN plans to slow its sales, which for wholesale transactions alone are close to $3 billion: rather, it launched its latest window (for investors and exporters) only last month,” the report said.

    It said the macro-economic damage from the latest period of oil price weakness, which is approaching three years, could have been manageable if a fiscal buffer against external shocks had been functioning.

    The CBN also sold N31.94 billion ($104.76 million) in treasury bills last Friday in a bid to tighten liquidity in the money market, while overnight lending rate fell.

    Traders said the bank sold N31.52 billion of 349-day treasury bill at 18.59 per cent and N440 million naira of 160-day treasury bill at 17.98 per cent at an auction last Friday.

    Cost of borrowing among commercial lenders, however, dropped to around five per cent on the interbank market from around 8.5 percent last week. Traders said cash balance in commercial lenders’ accounts with the CBN stood at N320.35 billion last Friday, boosted by the repayment of around N287.39 billion in matured treasury bills last Thursday.

    “Interbank rate is at low level because the CBN sold fewer dollars this week (on the currency market),” a currency trader said.

    Traders expect rates to remain flat next week unless the CBN decides to take advantage of the low rates to mop-up excess liquidity from the banking system.

  • CBN lifts forex market with $195m

    CBN lifts forex market with $195m

    The Central Bank of Nigeria (CBN) yesterday intervened in the foreign exchange (forex) market with a  $195 injection into key segments of the economy.

    The forex inflow, which came on the first day of business after the Eid-el-Fitr celebration, went to various segments of the inter-bank market.

    The intervention was part of CBN’s plans to shore up the value of the naira against the dollar and achieve its exchange rate stability goal. The naira continued its stability in the forex market, closing at N370/$1 in the parallel market, from N520/$1 in February.

    The narrowing of rate gap was achieved after the CBN in the last four months pumped over $5 billion into the interbank, bureau de change, wholesale spot and forwards auction segments of the market.

    Also, supporting the naira is the newly introduced Investor/Exporter Forex window which has attracted $2.5 billion from foreign investors since April 24, when it was introduced.

    Analysts said the introduction of a new foreign exchange window for investors and exporters targeted at increasing forex supply in the market and allowing the timely settlement of transactions helped achieve the current exchange rate.

    A breakdown of Wednesday’s intervention indicates that authorised dealers in the wholesale window segment received a $100 million offer from the bank. Small and Medium Enterprises (SMEs) and invisibles windows were allocated $50 million and $45 million.

    The CBN has been intervening on the official market in the last few months to narrow the spread between rates on the official market and black market.

    The naira came close to converging at the investor foreign exchange window and black market last Friday, with analysts attributing the development to increased dollar liquidity in the forex market.

    The naira was quoted unchanged at N370 per dollar at the black market.

    Commercial lenders are yet to put up a quote on the interbank market. The naira closed at N305.85 to the dollar on the interbank window on Friday.

    Nigeria is contending with a currency crisis brought on by low oil prices, which has tipped the economy into recession and created chronic dollar shortages. The CBN is keen on attracting foreign investors and at the same time maintaining a strong currency to ward off inflation.

    It has at least six exchange rates, including a retail rate set by licensed exchange bureaux, official and black market rates and a window for investors where the naira can be traded at rates set freely between buyers and sellers.

    The CBN’s Acting Director, Corporate Communications Department, Isaac Okorafor, confirmed the figures and disclosed that the Bank was impressed by the high level of transparency exhibited by stakeholders in the market.

    The CBN had last Friday allocated $240 million to the Retail Secondary Market Intervention Sales (SMIS) for spot and forward deals. With the rate of inflation dropping from its April 2017 figure of 17.24 per cent to 16.25 per cent at the end of May, 2017, the CBN spokesman says the CBN remains upbeat that the fortune of the naira will improve further in the months to come.

    But JPMorgan Chase & Co. and Renaissance Capital have said the naira rally, sparked by increased sales of foreign exchange forwards and looser capital controls, is contingent on the CBN continuing to sell down its foreign reserves.

    Nigeria’s gross external reserves have continued to drop as the CBN intensify interventions in the forex market. According to CBN data, the reserves fell from $30,291,917,668 on June 7 to $30.2 billion on June 16.

    The reserves had decreased by 1.19 per cent ($37 million) to $30.49 billion as at May 25 from $30.86 billion recorded at the end of April.

  • Banks access to forex improves over new window, says Fitch Ratings

    Banks access to forex improves over new window, says Fitch Ratings

    Fitch Ratings has said  banks’ ability to access foreign currency (FC) has improved considerably since the Central Bank of Nigeria (CBN) introduced a foreign exchange “window” at end-April aimed at investors and exporters.

    The Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) mechanism, commonly referred to as the “Investors’ and Exporters’ FX Window”, appears to be boosting FC supply and the flow of FC liquidity into the banking system. Improved access to FC means that liquidity pressures have, for now, eased for Fitch-rated banks.

    It said FC was in acute short supply through much of 2016 and early this year, restricting imports and forcing several Nigerian banks to extend maturities on their trade finance obligations. NAFEX provides investors and exporters with a more transparent mechanism through which they can sell FC to willing buyers.

    “Authorised banks act as intermediaries, clearing funds supplied by portfolio investors and exporters and ensuring timely execution of settlement for buyers. Despite its short record, volumes transacted through NAFEX are growing. In our opinion, NAFEX offers a more transparent alternative to accessing FC than is available through the other foreign-exchange markets in the country,” it explained.

    It added that several exchange rates operate in Nigeria. The CBN was the main supplier of FC during the height of the FC liquidity crisis and it still sells FC to the market through regular auctions, with banks acting as intermediaries.

    Its official exchange rate is N305 to the US dollar but it sets alternative official rates at its FC auctions and different rates apply for retail, wholesale, personal and small business purchasers of FC.

  • Forex: 3,239 BDCs access $520m in four weeks

    Forex: 3,239 BDCs access $520m in four weeks

    The 3,239 bureaux de change (BDCs) approved by the Central Bank of Nigeria (CBN) got $520 million from the apex bank dollar interventions in the last four weeks, The Nation has learnt.

    The funds, followed $40,000 per BDC weekly dollar allocations from the CBN, in its commitment to deepen liquidity in the foreign exchange market.

    A circular from the CBN confirmed the number of BDCs, even as the regulator has reiterated its commitment to continue funding key segments of the forex market.

    The last review of approved BDCs was in January when the CBN approved licences of 3,147 operators and 71 Finance Houses that met its N35 million and N100 million mandatory capital bases.

    The reviewed BDCs’ list was the first since May 29, last year when the apex bank approved 2,998 operators to meet the foreign exchange needs of customers at the retail-end of the market.

    The CBN also approved 71 Finance Houses licences, from previous 65 operators, created to operate at the middle tier of the financial system and cater for the financial needs of the Micro, Small and Medium Enterprises (MSMEs).

    The reforms in the Finance Houses sector have been ongoing for years. The CBN, to sanitise the sub-sector, revoked the licences of 208 finance companies and cancelled the approvals-in-principle of 462 others.

    The reforms, the CBN said, were made to have Finance Houses that were strong. The CBN said it woul continue to sanction Finance Houses that operate without licences.

    The CBN said the new approvals in BDCs and Finance Houses sectors were in line with its plan to deepen the foreign exchange market by getting more operators involved in the retail end of the market.

    Earlier, the CBN refunded almost N100 billion mandatory caution deposits to all the BDCs, after it stopped operators from accessing foreign exchange from official windows.  Each licensed BDC received N35 million from the apex bank.

    Another circular signed by CBN Director, Financial Policy & Regulation, Kelvin Amugo, said the decision was reached, following recent development  in the operations of BDCs in the economy. He added that the regulator will retain the N1 million licensing fee paid by each of the operators.

    The Association of Bureau De Change Operator of Nigeria (ABCON) President, Aminu Gwadabe, said the licensing of new BDCs was a positive development  expected to deepen dollar liquidity.

    He said the CBN reviews the list of operators quarterly, adding that the list has grown from over 1,400 to its current figure.

    “There are more approvals expected. It is a welcome development,” he said.

    According to him, ABCON believes that despite the challenges facing the economy, the CBN and BDCs will continue to work together and find sustainable solutions that can help the country wriggle out of the ongoing forex crisis and achieve full economic recovery.

    “We have continuously assured the CBN and taken appropriate measures to ensure that purchased funds are disbursed to end users and for eligible transactions only. We also render weekly returns on purchases from the banks to Trade and Exchange Department of the apex bank.

    ‘’We also ensure strict compliance with the provisions of the anti-money laundering laws observance of appropriate Know-Your-Customer principles in the handling of forex transactions,” he said.

    The ABCON chief reiterated the need for the public to deal with only CBN-licensed BDCs and for the public to report erring operator for sanction.