The Nation Newspaper

Tag: forex

  • Forex: CBN pumps additional $100m into market

    Forex: CBN pumps additional $100m into market

    The Central Bank of Nigeria (CBN) on Tuesday injected another sum of 100 million dollars into the interbank foreign exchange market, its acting Director, Corporate Communications, Isaac Okorafor has said.

    Okorafor said the measure became necessary as part of the initiatives to make Forex easily accessible, thereby crashing demand at the black market.

    The director made this known to newsmen in Abuja on Tuesday.

    He said that the measure was to fund the commercial banks with enough Forex to cater for the request of customers and to meet basic travelling allowance, medicals and tuition fees.

    This fresh injection by the apex bank brings the amount so far pumped into the interbank Forex market within the last two weeks to 1.14 billion dollars for both forwards and invisibles.

    A former Economic Adviser to former President Olusegun Obasanjo, Prof. Ode Ojowu said the measure would further create problems for currency speculators who had not recover from the sudden appreciation of the Naira.

    “It appears this time around, the CBN has decided to become smarter than the market manipulators by putting on its cap of authority to look beneath the market forces,” he said.

    Ojowu also commended the efforts of the CBN in ensuring the continuous appreciation of the Naira.

    He attributed this to good policy and effective communication strategy, which had increased dollar supply to the market. (NAN)

  • CBN threatens to bar forex dealers

    CBN threatens to bar forex dealers

    The Central Bank of Nigeria (CBN) has threatened to bar authorized dealers in foreign exchange (forex) that fail to comply with its new directive on foreign exchange transactions.

    According to a circular released over the weekend and signed by Dr. Alvan E Ikoku, Director, Financial Markets Department to all authorized dealers, the apex bank ordered such authorized dealers to “open teller points in all locations in order to ensure access to foreign exchange by their customers without any hindrance.”

    Other directives given by the CBN include having electronic display boards in all their branches, showing rates of all traded currencies; process and meet the demands for PTA/BTA customers within 24 hours of such applications and to process and meet demands for school fees (including allowances) and medical bills within 48 hours of such applications.

    These directives/ orders the CBN said is “to further increase foreign exchange liquidity in the market and ensure availability to end users.”

    The CBN then warned that “non-compliance with these directives would attract sanctions, including but not limited to being barred from all future CBN foreign exchange interventions.”

    For over a week now, the CBN has carried out several interventions in the foreign exchange market to curb the value of the Naira from getting out of control.

    The measures have seen the Naira appreciate throughout last week with the possibility of the nation’s currency further appreciating in the near future.

  • 16 banks fund $220m with N72b at Forex forwards

    16 banks fund $220m with N72b at Forex forwards

    With N72 billion, 16 banks funded $220 million Central Bank of Nigeria (CBN) allocations under the Forex Forwards policy meant to stabilise the naira, it was learnt yesterday.

    Banks are calling for bids from retail end-users in preparation for the business travel allowances, school fees and medical bills auction. The CBN is expected to from tomorrow begin releasing weekly forex cash (every Tuesday) to commercial and merchant banks to meet needs at retail end of the market.

    The lenders are informing customers interested in buying Personal and Business Travel Allowances, and paying school fees and medical bills about requirements for getting forex.

    A CBN Financial Markets Department report released yesterday showed that 10 banks, which could not be identified as at press time, with N54 billion funded $162 million Forex Forwards for 30-day tenor maturing March 27. The wholesale intervention rate was between N330 and N335 to the dollar.

    Six banks, also unnamed, funded $58.52 million Forex Forwards for 60-day tenor, maturing April 25 with N18.6 billion. The wholesale intervention rate was between N315 and N320 to the dollar.

    The intervention, the CBN said, was meant to deepen dollar liquidity in commercial banks, sustain efforts to strengthen the naira against the dollar and ensure that forex is available to genuine users.

    Specifically, the drastic fall in the price of crude oil, which constitutes the largest component of Nigeria’s forex reserves, has cut dollar earnings from about $3.2 billion monthly to about $1 billion. This has negatively impacted on the value of the naira.

    Some of the measures put in place by the CBN to end the crisis include the first Naira-Settled Over-the-Counter (OTC) Forex Futures Market (FFM) launched on June 27, 2016 with FMDQ OTC Securities Exchange.

    Also, last week’s announcement by the CBN making more dollars available to commercial banks to fund Personal and Business Travel Allowances as well as settle medical bills and school fees forex users was also meant to strengthen the naira.

    The Naira-Settled OTC Forex Futures are non-deliverable forwards or a contract where parties agree on an exchange rate for a pre-determined date in the future, without the obligation to deliver the underlying dollar on the maturity/settlement date.

    On the maturity date, it will be assumed that both parties would have transacted at the spot forex market rate. The OTC Forex Futures contract is an effective exchange rate management tool supported by a transparent price driven by a two-way quote market. The contracts assist the CBN in managing the volatility in the spot forex market, thereby promoting stability and entrenching market confidence.

    A report by Afrinvest West Africa Limited, an investment and research firm, said the naira shed 46.5 per cent and 66.3 per cent in the interbank and parallel markets between June 2014 and January 2017. The spread between the two rates reached an all-time high of N215.00 last week.

    “However, the political and economic implications of the forex shortages motivated the directive issued by the National Economic Council to the CBN last week for a more flexible forex market structure and closure of the gap between interbank and parallel market rates. In light of this, the CBN issued a new policy action on the 21st February, 2017, which is expected to increase forex allocations to retail end users while reducing the demand pressures in the parallel market,” it said.

    The success of the CBN’s aggressive intervention and moderation in demand in the unofficial market led the naira to post its biggest one-week rally of 13 per cent in more than three years in the parallel market, appreciating from a trough of N520 to dollar to a three-month high of N460 to dollar as speculators with short naira positions sold off.

    “Personal and business travel allowances, school fees and medical fees have been estimated to account for less than 20 per cent of total forex demand in the country, hence there is still a large volume of demand  that could pressure rate at the parallel market. While we believe the successful implementation of the new FX directive would ease pressure in the parallel market, flexibility in pricing and allocation in the interbank market remains a necessity to restore confidence in the system,” the firm said.

  • ‘How biofuel can be major forex earner’

    A biochemist and expert in biofuel technology, Chief Obiora Ogonsiegbe, has canvassed the need to embrace biofuel  to position it as a veritable foreign exchange earner.

    Ogonsiegbe said it was imperative to embrace biofuel because Nigeria could run out of fossil fuels.  He said biofuels are made from plants that could be replanted.

    Biogel, a product of biofuel, according to him, when used for domestic cooking is clean, safe and burns better than kerosene, firewood and charcoal, which are harmful to the body.

    In an interview in Lagos, he advised the government and development banks to support small and medium enterprises (SMEs) engaged in biofuel by supporting them with adequate funds for machinery and materials.

    He said diversification could help Nigeria to come out of the recession.

    Ogonsiegbe noted that biofuel has other advantages, including emission of less pollution, which reduces  respiratory ailments and cancer.

    He said: “Firewood has been dubbed “the killer in the kitchen” as it has been estimated that cooking indoors with firewood and charcoal is equivalent to each child in the household smoking two packs of cigarettes a day.”

    He said less reliance on firewood and charcoal reduces the drudgery of looking for firewood and slows deforestation and erosion, global warming and climate change, which is fast creeping into the country.

    On the economic benefits of biofuel, Ogonsiegbe said if the government or a development bank would partner him, the biofuel project had enormous multiplier effects. “It will produce a lot of the much-needed food and use the associated wastes to produce biofuel with its attendant benefits to the economy. These include job creation, increased food production, increase in rural incomes and a massive contribution to the global efforts to slow the emission of greenhouse gases. It will also reduce Nigeria reliance on imported petroleum products.”

    Statistics by Nebraska Ethanol Board, he said, shows that biofuels reduce green house gases emission by about 60 per cent compared to fossil fuels.

    Nigeria, the world’s largest producer of cassava, he said, could produce all the starch and ethanol she needs for domestic consumption and export, that but unfortunately she doesn’t. Rather she imports them.

    He advised that the country’s huge cash spent on food import  could have been deployed to meeting its enormous developmental needs.

    He said he was canvassing biofuel  to produce biogel from it for domestic cooking because the price of gas and kerosene has been astronomical in recent times and beyond the reach of the average Nigerian.

    On the raw material for biofuel, he said, it is cassava, which will be grown on a captive farm annexed to the project.  He said the Federal Government’s policy on agriculture would not be complete if the processing side is not linked to having a by-product that would be useful for other sectors.

    He advised the government to resist the mistake it made in the oil and gas sector, where the country has no viable petrochemical industry to serve related industries.

    The expert added that cassava by-products are  useful. He said: “All the cassava produced on the captive farm will be used solely for garri production in a near-by garri factory attached to the proposed project. Only the wastes, such as peels, particles of cassava that escaped milling and the starch that sediment in the water when the milled cassava is pressed, that will be used in the production of the ethanol gel.

    According to him in 2009, Nigeria spent N291 billion on fuel subsidy alone. By 2011, it had shot up to N2.7 trillion. He promised the project would be scaled up steadily, if a development partner took interest.

    He said the project is located in three disciplines, namely, biological sciences, engineering and general management, adding that the promoter should be well-grounded in these areas to ensure a successful execution.

  • CBN sells $230m in forex forward as naira recovers

    CBN sells $230m in forex forward as naira recovers

    •Fed Govt eyes $500m Eurobond

    The Central Bank of Nigeria (CBN) yesterday auctioned $230 million in forward contracts on the official market. The dollar sale came after the regulator sold $370 million this week to boost dollar liquidity and help narrow the gap between the official and black market rates, traders said.

    The bank also sold $1.5 million on the spot market to help keep interbank rates at 305.50 per dollar. On the black market the naira firmed to N490 after opening at 505, traders said.

    Meanwhile, Nigeria may tap the international bond market for a second time this quarter as the nation seeks to stimulate an economy facing its worst downturn in 25 years.

    Vice President Yemi Osinbajo asked lawmakers this week to approve the sale of a $500 million Eurobond as part of the nation’s 2016 budget, according to a letter to parliament seen by Bloomberg.

    “We wish to take advantage of favorable market conditions to issue a Eurobond” by the end of March, Osinbajo said in a letter to lawmakers, seeking prompt approval for the plan.

    Africa’s most populous nation issued a Eurobond this month for the first time in almost four years, raising $1 billion in a deal that was about eight-times oversubscribed. The economy shrank 1.5 per cent in 2016 amid a slump in oil revenue and diminished foreign investment, according to International Monetary Fund estimates, the first full-year contraction since 1991.

  • Fitch: forex market changes may ease scarcity

    Fitch: forex market changes may ease scarcity

    Measures announced on 20 February by the Central Bank of Nigeria (CBN) may ease some of the severe foreign currency liquidity pressure faced by the country’s banks, Fitch Ratings says.

    The most important aspect of the CBN’s announcement is a plan to normalise the foreign exchange (forex) interbank market, the group said. The intention is to clear the backlog of overdue foreign currency obligations owed by banks to international creditors.

    According to Fitch, “these are primarily trade finance obligations owed to correspondent banks. In addition, the CBN will no longer have a say in how banks on-lend the foreign currency they access from it. Banks previously had to demonstrate that funds were being directed to priority sectors of the economy. The CBN says providing foreign currency to the manufacturing sector is still a priority, but with restrictions eased, larger banks with greater access to foreign currency will be free to lend to the smaller banks whose access to international funding is restricted.”

    The CBN has also stated its intention to increase intervention in the forex interbank market to increase supply. The CBN has also reduced the maximum waiting times for banks to take delivery of foreign currency through its forward sales contracts to 60 days from 180. The first of these forwards was announced yesterday for $500million, with banks reported to have bought around $371million in one-month and two-month forwards. This should help banks make more timely payments to creditors, speeding up the flow of currency to importers and helping the economy.

    The CBN’s initiatives are an important boost for banks as access to foreign currency liquidity is tight and banks have struggled to meet their foreign currency obligations. Nigeria is highly dependent on imports and Nigerian banks have long provided trade finance facilities to importers.

    Currency scarcity and exchange rate weakness have made it harder for importers reliant on naira-denominated cash flows to service US dollar-denominated trade finance lines, forcing some banks to restructure their obligations with international correspondent banks last year.

  • Forex utilization: CBN disburses $2.83bn in two months

    Forex utilization: CBN disburses $2.83bn in two months

    The Central Bank of Nigeria (CBN) says it has disbursed the sum of $2.83 billion for utilization in the critical sectors of the economy between December 2016 and January 2017.

    A release by the Acting Director, Corporate Communications Department of the CBN, Mr. Isaac Okorafor stated that manufacturing, industrial raw material and agriculture among others topped these disbursements targeted at employment generating and wealth creating sectors of the economy.

    A breakdown of the disbursement shows that, “the sum of $609 million and $228 million were released for raw materials in the months December and January respectively while manufacturing also attracted the sum $53 million and $71 million respectively during the same period.”

    The foreign exchange utilization figures indicate that the sums of $1.839 billion and $0.989 billion respectively were extended to critical sectors like manufacturing, agriculture, petroleum products and airlines among others in December 2016 and January 2017.

    Commenting further on the development, Okorafor, stressed the determination of the Bank to continue to ease the foreign exchange pressure on critical sectors.

    It will be recalled that the CBN in the month of November 2016, supported critical sectors with $1,070,175,392.04 equivalent of foreign exchange for agricultural machinery, industrial raw materials, education and personal travel allowances to source industrial raw materials and spare-parts through the interbank foreign market.

  • FG may reverse forex restriction of 41 items, says Customs

    FG may reverse forex restriction of 41 items, says Customs

    The Zonal Coordinator, Zone `A’ of the Nigeria Customs Service (NCS), Assistant Comptroller-General Monday Abueh, has said that the Federal Government may reverse the foreign exchange restriction placed on 41 items imported into the country.

    Abueh disclosed this in Ibadan during his familiarisation tour of Oyo/Osun Commands as part of his visits to Customs formations under his jurisdiction.

    The Nigeria Customs Service (NCS), had on July, 2015, restricted 41 items, including vegetable oil, poultry products, cosmetics, plastic and rubber products, among others, from access to foreign exchange.

    The apex bank said the country had the capacity to produce those items locally.

    Abueh said that when government’s policies were rolled out, they were in the interest of the people, adding that Nigeria could not be enriching other countries by allowing some banned items into the country.

    He advised officers to be fully sensitised about implementing government’s policies anywhere they were posted to serve.

    Abueh urged officers to ensure non-passage of rice and vehicles into the country.

    He said that smugglers might be trying to make Oyo and other land borders their alternative routes since security at Idiroko and Seme was tight for them.

    The zonal coordinator said that the Comptroller-General, Retired Col. Hameed Ali and the Customs Management had redeployed officers to land borders’ commands to ensure that nothing escaped through all the routes in the areas.

    He also urged officers to learn excise operations to assist in cargo clearance.

    Abueh said his visit was meant to continue reminding officers about the Federal Government’s polices as well as the directive given by the comptroller-general to ensure security and protection of lives in the country.

    “Officers should be mindful of their duties and responsibilities as you embark on your primary assignment.

    “If you are careless in your duties and if you are caught, you will be held responsible for your action, ‘’ Abueh said.

    The assistant comptroller-general urged officers to ensure collection of duties on general goods coming through the borders.

    According to him, the language in the service nowadays is for officers to be knowledgeable about the operations of the service.

    Abueh urged officers to be willing to learn further, adding that without doing this, such officers would be having problems with operations.

    He, however, commended officers and men in Oyo/Osun command for being on top of their operations as they recorded tremendous seizures.

    “The numerous seizures had indicated that smuggling in this axis are high. That is why I am here to convey the comptroller-general’s message to officers to continue doing the good job.

    “Officers should ensure 100 per cent examination before approving document for delivery of consignment, because any mistake after clearance will not be acceptable by the service,” NAN quotes Abueh as saying.

    After inspecting the command’s warehouse, the zonal coordinator discovered that the warehouse was full to the brim with seizures of rice, vegetable oil, used tyres, second-hand vehicles and other items.

    Abueh said the Management of the NCS would request for officials of the National Agency for Food and Drug Administration and Control (NAFDAC) to ascertain the state of the edible items before destroying them to avoid environmental hazards.

    He warned smugglers to desist from unlawful operations and follow due process in clearing goods in order to avoid seizures.

    The Customs Area Controller of Oyo/Ogun, Comptroller Tope Ogunkua, disclosed that the seizures were intercepted over the years.

    Ogunkua said that the command’s warehouse was having dangerous odour due to some items like rice, which had expired in the store.

    He said that the command generated N14.8 billion between January and December 2016.

    Ogunkua said that the command’s target for 2016 was N19.3 billion but it had a shortfall of N4. 5billion.

    He said that command would not relent in its effort to suppress smuggling to the barest minimum. 

  • ‘Why oil marketers ‘re not getting forex’

    ‘Why oil marketers ‘re not getting forex’

    • Fuel importation stops 2019

    The Central Bank of Nigeria (CBN) has explained the difficulty in getting foreign exchange by petroleum products dealers.

    According to the apex bank, the progressive decline in the amount of forex available to the CBN made it difficult to meet the demands of fuel marketers.

    Its Deputy Governor, Sarah Alade, who represented the CBN governor, Godwin Emefiele told the House of Representatives  Ad hoc committee on the Reduction of Petrol Prices headed by Hon. Nnanna Igbokwe, that things “ are not the way it used to be.”

    She said:  “There is shortage of forex. Between 2013 and  2014, the Federal Government used to get between $2 billion and $3 billion monthly and the CBN in the interbank sells about 30 per cent of that. 70 per cent come from the foreign investors.

    “Today, we get between $600 million and $700 million. Nothing comes in from interbank. $1. 5 million is sold everyday and $1 billion is done in December to clear matured letters of credit. It’s not the way it used to be.”

    On why International Oil Companies (IOCs) were selling forex to marketers directly, Minister  of State for Petroleum Resources,, Ibe Kachikwu told the committee that there was arrangement made to ease the forex scarcity being experienced by importers who collect between 35 to 40 per cent of the forex in the CBN.

    He said it was an “intervention scheme,” which he said has not changed since the minister started it with the IOCs. According to him. A cross functional team made up of Nigerian National Petroleum Corporation (NNPC), CBN,  Petroleum Products Prices Regulatory Agency (PPPRA) was formed and “applications came from marketers for forex. They’re screened against a set of criteria.”

    He said the only solution to the lingering forex/fuel problem is the full utilisation of the local refineries.

    The minister said within two years, the Federal Government revived non-functional refineries to contribute about eight million out of over 20 million litres of petrol consumed in the country daily.

    Kachikwu said the country would be able to stop importation of fuel by 2019. According to him the Federal Government attracted foreign investors to partner with the NNPC by initiating a model to repair the country’s refineries within two years.

    He said: “This has consistently served as a target for this government so that by 2018 December, NNPC must be able to deliver on some of the terms given them, one of which is to reduce petroleum importation by 60 per cent.

    “By 2019 we should be able to exit completely the importation of petroleum products in this country.”

  • Forex ban on 41 items stays, says CBN

    Forex ban on 41 items stays, says CBN

    The Central Bank of Nigeria (CBN) has rejected calls by the Organised Private Sector (OPS) to reverse its foreign exchange (forex) ban on 41 goods, which the country can produce.

    The CBN said it would continue to support the real sector rather than lift the ban.

    CBN’s Acting Director, Corporate Communications, Mr. Isaac Okoroafor, said despite criticisms, CBN would not drop the policy nor bow to  “self-serving” interests.

    “We have observed with great concern the continued and unwarranted attack on our policies by a group of Nigerians, whose real interests, findings have shown, are anything near altruistic, but rather self-serving and unpatriotic,” Okoroafor said.

    He said while the CBN respected Nigerians’ or stakeholders’ views, it found it curious that some interests have remained persistent in misinforming the public, with the aim of discrediting the genuine management of the economy.

    Okoroafor said this could create  distrust and panic within the financial system. “Indeed, self-centered individuals, who have failed to assail our patriotic position, have resorted to the sponsorship of serial propaganda to misinform and mislead the public on the objectives of our policies,” he said.

    He said some unpatriotic elements were pushing for a reversal of the policy aimed at conserving forex, stimulating agriculture and manufacturing, and promoting exports.

    Okoroafor blamed the economic challenges on the past practice of frittering away huge oil earnings.

    “Our decisions on forex management are prompted by the challenge posed by the level of depletion of the country’s reserves, arising from issues, such as drastic reduction in oil earnings, speculative attacks and round tripping,” he explained.

    According to him, the pressure on the foreign reserves has persisted due to huge reduction in monthly foreign earnings, which fell from over $3.2 billion monthly in 2013 to below $500 million last year, when the demand for the US dollar, particularly by importers, continued to rise.

    Despite the challenges, the CBN has continued to ensure that there is liquidity and transparency in the forex market, while checking inflation, and promoting productivity in critical sectors of the economy, Okoroafor said.

    However, the Organised Private Sector (OPS) members are not swayed by CBN’s position. Describing the policy as worrisome, they insisted that the apex bank’s unorthodox forex allocation system would continue to hamper  growth.

    The Lagos Chamber of Commerce and Industry (LCCI) Direc-tor-General, Mr. Muda Yusuf, said, in Lagos, that it was worrisome that the CBN had remained silent on some forex-related issues that were affecting the economy.

    He listed them to include acute illiquidity,  inflow impediments and too tight regulations on movement of funds.

    Others, he said, were the effects of the forex policy on non-oil exports, its disincentive to foreign direct investments and the negative impact of the policy on portfolio inflows.

    “Others are adverse effects on remittances by airlines, foreign investors’ dividends and profits; adverse effects on Diaspora remittances and the effects on investors’ confidence,” Yusuf said.