The Nation Newspaper

Tag: forex

  • Forex speculators count losses on CBN measures

    Forex speculators count losses on CBN measures

    There are strong indications that the efforts of the Central Bank of Nigeria (CBN) to stabilise the naira may have started yielding results.

    Feelers from two officials of the apex bank, who pleaded anonymity, indicate that the deployment of a number measures by the bank may have turned the tide in the foreign exchange (forex) market and led to losses suffered by currency hoarders and speculators.

    The CBN had accused speculators of being behind the market burble since the upper week which led to the value of the naira whcih crashed to an all-time low of N400 to the U.S dollar.

    The CBN Governor, Godwin Emefiele, accused speculators of conniving with bureau de change (BDC) operators to undermine the efforts of the bank at propping up the naira and warned that such speculators would eventually be punished by the market.

    On Wednesday, the naira at the parallel market exchanged for about N295, a further improvement on the N305 to the dollar the day before, garnering over N100 gain on the panic by speculators struggling to cut their losses.

    Some parallel market operators said they bought from sellers at the rate of N272 and sold at N295. A good number of the sellers who had suffered huge losses confessed that they had bought at N380 hoping to sell at N400 before the sudden turn in fortunes.

    Industry analysts say a number of measures taken by the apex bank lately might have led to this improvement.

    One is the decision to publish all forex sales from the inter-bank market to make for transparency. The second said the mop-up operations of the CBN, which had reduced the excess liquidity behind the high speculation of the upper week.

  • Forex speculators from Benin Republic, Ghana, others invade Nigeria

    FOREIGN exchange (forex) speculators from  Benin Republic, Niger, Chad, Sudan, Ghana and other African countries are cashing in on the wide margin between the official and parallel market rates to make huge profits, The Nation has learnt.

    The speculators are moving in huge dollar deposits to meet the rising demand by Nigerian importers and other buyers requiring dollar to pay their children’s school and medical fees.

    Although the exchange rates are high, the urgency and necessity left the buyers with no option than to buy from the parallel market.

    The official exchange rate has remained at N197 to a dollar in the last six months, creating a huge gap between the official or interbank rates and parallel market rates.

    Confirming the development, President of the Association of Bureau De change Operators of Nigeria (ABCON) Aminu Gwadabe said over $100 million inflow was recorded last Friday.

    He said this led to a temporary appreciation of the naira against the dollar.

    The naira, on Friday, traded at N365 to a dollar – from N391  the previous day – because of the liquidity the dollar inflow brought to the market.

    Gwadabe said by Saturday, the naira again depreciated against the dollar as it exchanged at N375 to a dollar, adding that the volatility is expected to continue this week.

    “Foreigners are taking advantage of the naira situation. We have 18 countries within the continent where the naira is accepted. The speculators are coming in because of the huge gap between official and parallel market rates,” he said.

    Gwadabe said exporters, mainly from Dubai, have agents in Nigeria, who accept naira from importers at agreed dollar rates.

    The importers travel with certified invoice to bring in the goods, a practice, he said, reduced pressure on the naira.

    “In my view, the CBN should address the supply side of the market by allowing oil companies and banks to sell dollar to bureau de change operators as a measure to reduce pressure on the naira,” he said.

    Tumbling global oil prices have battered Nigeria’s crude exports, with foreign exchange reserves down to an 11-year low at $27.85 billion.

    The Federal Government is concerned that further naira depreciation would hurt Nigerians, but the CBN’s refusal to revise the pegged exchange rate widened a gap between official rates and the parallel market.

    Managing Director of Cowry Assets Management Limited Johnson Chukwu said economic agents “are rational, and will go to where their values will be maximised or their risk minimised”.

    He said Nigeria did not have the financial resources to solely develop its economy in the short to medium term and that current global social architecture made absolutely closed economic borders impossible.

    “The crisis in the economy seem to be worsening since the crash in oil prices from about $115.09 (Brent crude spot price) on June 19, 2014, to  $34.83 (Brent crude) today.

    “This is despite a barrage of monetary and administrative policies introduced by the CBN to stabilise the exchange rate and restart economic growth.

    “While the CBN has been active in trying different options, business managers and investors are still waiting for the managers of the fiscal policies to present their response to the crises, which should be harmonised with those of the monetary authorities,” he said.

    Chukwu insisted that while the CBN effectively maintained the official exchange rate at N197 to a dollar, it has been impossible for it to meet the legitimate demand at the official window at the stipulated official rate.

    “It is the backlog of unmet demand, which has spilled over to the shallow parallel market and driven down the naira,” he said.

  • Bankers’ Committee mulls forex for fees, overseas medicals

    Bankers’ Committee mulls forex for fees, overseas medicals

    • CBN: 57m Nigerians access financial services

    The Central Bank of Nigeria (CBN) and deposit money banks are working out strategies to minimise foreign exchange (forex) demand for school fees and medical expenses abroad. The measure is intended to prevent crowding out demands for forex by the real sector.

    The Managing Director, Access Bank Herbert Wigwe, told reporters at the end of the Bankers’ Committee meeting in Abuja yesterday,  that the banks did not agree on any final position, “but that we should not allow this demand to crowd” out real sector investment because in any event, the money that you use to pay these school fees is from industry that is working locally.

    “We should revisit the educational system and make sure our children go to school locally. Why can’t we revisit the health care system to make sure it works better? he queried, saying, “why must we spend so much money on children’s school fees overseas or medical tourism?

    The idea which is still on the drawing board he said “is not that you can’t do it, the point is that you cannot access it from the CBN’s limited resources; we did not reach any formal conclusion on it, but that is the general direction that we are headed.”

    According to Wigwe, “we have increased demands for invisibles which typically represent demands for children school fees, medicals and all of that moving on the CBN foreign exchange. The problem with that is that it tends to crowd out the critical foreign exchange that should be used in the real sector for manufacturing to support industries to encourage employment. There were questions as to how far we are going to allow this to go on. Shouldn’t we redirect these resources towards the real sector?. We focused on the real sector in this case with respect to support most of the manufacturing concerns particularly those that utilise local raw materials for production. At this stage of our economy, we need to look at how to stimulate production so that we will be able to provide goods and services to people at minimal cost”.

    Also speaking, the Managing Director, Standard Chartered Bank, Mrs Bola Adesola said “a bit more looking at the numbers and data will happen before the CBN ultimately comes to a decision.

    The Bankers Committee of the Central Bank of Nigeria (CBN) yesterday  said 57 million Nigerians, which represents 66 per cent of the population, now have access to financial services.

    The Director, Banking Supervision Department, CBN, Mrs Tokunbo Martins, made this known when she briefed newsmen at the end of the committee’s meeting in Abuja.

    She was accompanied by the Managing Director, Access Bank Plc, Mr Herbert Wigwe; the Managing Director,Standard Chartered Bank, Mrs Bola Adesola; and the Managing Director Diamond Bank Plc, Mr Uzoma Dozie.

    “One of the major issues we discussed is the issue of financial inclusion. It is very important for 170 million Nigerians to have some form of access to financial services and so I am happy to report that there has been substantial improvement.

    “You know a couple of years back, the number of Nigerians financially included was at 40 per cent but currently we have 66 per cent of Nigerians financially included which is about 57 million Nigerians.

    “The target that we are working on is 68.5 per cent by the end of December 2016 and so if that target is achieved, I think we would have gone a long way in alleviating the sufferings if Nigerians ,” she said.

  • ‘Forex restriction catalyst for local manufacturing’

    The Central Bank of Nigeria (CBN) Foreign Exchange (forex) policy barring importers of certain items from accessing forex is a blessing in disguise, the Chief Executive Officer (CEO), Spectra Foods Ltd., Mr. Duro Kuteyi, has said.

    To him, it will serve as a catalyst to local manufacturers, especially Small and Medium Enterprises (SMEs),

    Kuteyi, who spoke with The Nation, described the policy as a right step in addressing unbridled importation, which is one of the major challenges facing local manufacturing. He said the policy was an affirmation of the Federal Government’s readiness to promote the backward integration policy of encouraging local sourcing of raw materials hitherto imported into the country.

    “It is good for manufacturers. In the past, Nigeria was a dumping ground for imports. The dumping will definitely reduce. Like someone importing apple using scarce foreign exchange to import apple when we have fruits wasting away,” Kuteyi said, pointing out that the policy was a major stimulant for local productivity.

    According to him, the policy is a shot in the arm of local manufacturers, especially SMEs. “The policy is good for manufacturers, particularly SMEs, because it is directed at reducing imported finished goods. “It’s an opportunity for SMEs’ capacity expansion, as they have the chance of enjoying higher patronage with less competition from finished imported goods,” he said.

    The industrialist said prior to the introduction of the policy, imported commodities dominated the manufacturing and industrial landscape, posing a serious threat to locally- manufactured products. He said local products suffered lack of patronage, and could not stand competition with foreign products, considering consumers’ penchant for foreign goods.

    Kuteyi lamented:“We SMEs in Nigeria produce and find it difficult to sell in the market. Some supermarkets don’t take our goods because they have the belief that they make more profit bringing imported materials to sell on their shelves. If they take products from SMEs, it is as if they are rendering a favour.

    “But when they import, they pay in advance and display on their shelves. They don’t encourage SMEs to thrive in Nigeria. And this has affected SMEs in Nigeria to the point that they cannot even expand.These are the things that the new policy will solve.”

    Kuteyi, however, said the policy will not affect those who are genuinely importing raw materials for their factories. “When you look at the genuine manufacturers, who depend on imported raw materials, these are the ones that should enjoy forex allocation. Like those who are into the making of laminated bags, rolls for manufacturers. These are packaging materials for manufacturers,” he said.

    While reiterating that the forex policy would encourage SMEs, he said there is need to address other challenges militating against SMEs’ productivity, particularly inadequate funding. According to him, many SME owners find it extremely difficult to raise capital for purchasing requisite machineries.

    The industrialist, who insisted that under-funding remained the bane of SMEs, said there is need to ensure that SMEs, who engage in manufacturing, get approval to import their machineries. According to him, about 60 per cent of SMEs depend solely on local raw materials that need not be imported and as such, should be supported to finance their businesses.

    “If you look at the SMEs, a lot of them cannot raise money to import raw materials, they buy the raw materials from importers. This is a special case that Federal Government should look at,” he said, adding that Bank of Industry (BoI) can make recommendation for those SMEs they have given money to or have bought machineries for that depend on raw materials so that their banks can assist them in getting forex for their raw materials.

    Kuteyi, however, said the forex restriction has resulted in increase in prices. “It is either it reduces our profit or we also increase our prices to meet up with what the difficulty in getting forex has caused. For example, there is a company making carton for us but because they could not get access to forex, they reduced their production meaning that they reduced their staff. So, this is also affecting an average manufacturer,” he added.

  • Forex policy stifling ICT development, says Spectranet chief

    The foreign exchange (forex) policy of the Central Bank of Nigeria (CBN) has taken its toll on the information communications technology (ICT) sector.

    It has not only stifled efforts to expand capacity but has turned operators into debtors as they cannot get dollars to pay for equipment imported into the country, the Chief Executive Officer, Spectranet, David Venn said yesterday in Lagos.

    Speaking with ICT reporters in what the firm tagged: Town Hall Meeting, he lamented that the policy has put spanners in the wheel of the plans of entrepreneurs who depend on imported equipment such as Base Transceiver Stations (BTS) to offer high quality services to customers in the country.

    Spectranet is a firm that offers high speed internet services, using the latest technology which is 4G.

    He said the major challenge with the dollar drought is that the technology firm has the cash in naira but cannot get dollar to buy to pay for goods and services. According to him, international bandwidth requisite for the delivery of super fast broadband internet services and equipment are sourced from outside the country in dollars, lamenting that the forex squeeze has disorganised the capacity expansion plans of the firm.

  • Fed Govt urged to extend forex allocation to power firms

    For a stable power supply, the Federal Government should allocate foreign exchange to the power sector.

    This, according to the chairman, Egbin Power Plc, Mr. Kola Adesina,  will  help the sector’s players to perform better.

    He urged the Federal Government to allocate foreign exchange (forex) to power sector, as it does to their oil and gas counterparts, to enable them provide stable power.

    At a stakeholders’ forum in Lagos, he appealed to the government to help power firms recover some of their debts  to enable them improve their productivity.

    He said the allocation of forex and recovery of debts  were two major issues that should  be addressed to boost the industry.

    Adesina said access to foreign exchange by operators was critical to the growth of the sector. He said the failure of the government to provide the sector with incentives meant the growth of the sector would further be impeded.

    He said investors were operating in a harsh foreign exchange regime, in view of the significant drop in the value of naira, adding that this has negatively impacted on their operations.

    He said operators need foreign exchange to buy equipment from the Original Equipment Manufacturers (OEMs) abroad.

    He said: “One of the most critical issues bedeviling the operation of power firms is unfavorable foreign exchange mechanism. At the point of acquisition of the assets of Power Holding Company of Nigeria (PHCN) in 2013, the exchange rate was N155 per dollar. Thereafter, the rate fell to N199 per dollar at the official market.

    “Invariably, there is the need for the government to allocate foreign exchange to both the operators of both the power generation companies (GenCos) and power distribution companies (DisCos) in the country; the same way it provides for operators in the oil and gas industry.”

    He said this would enable power firms to get the  energy mix right, as well as help the country to record industrial growth.

    Adesina said the management has started feasibility studies on how to double the capacity of Egbin power s plant. He said the company’s growth plans include increasing electricity generation, construction of industrial power park and investing in renewable energy in the Northern.

    According to him, the park would help in promoting the small, medium and large scale enterprises and further move the  economy forward.

    “We, at (Egbin), would definitely overcome some of our challenges. As soon as the coast gets clearer, we would invest more in the sector. We, at Sahara Group, Egbin and KEPCO, are committed to the vision of electrifying Nigeria,” he said.

    The sector had tried to reduce its debt burden, caused by failure of some customers to pay their bills. Also, the operators have been asking for concessions to import equipment into the country for increased production.

  • CBN resumes forex sales to banks

    CBN resumes forex sales to banks

    The Central Bank of Nigeria (CBN) said it would resume forex sales to commercial banks. The apex bank told the lenders to fund their naira accounts to be able to participate in a currency intervention on the interbank market slated for today.

    Although the CBN did not disclose how much it would sell, but one trader said the bank sold between $100 million and $150 million at its intervention last Thursday and this could be repeated tomorrow.

    Last month the bank banned dollar sales to retail bureaux de change outlets, sending the naira to record lows on the black market and later stopped daily sales to the interbank market, all to conserve foreign reserves which are down to an 11-year low.

    The local currency traded around a pegged rate of N198 to the dollar on the official interbank market on Tuesday, but was quoted at N305 on the black market.

    The CBN had imposed some currency control measures to save the naira. In June, it curbed access to the interbank currency market for importers bringing in a variety of goods. In an effort to conserve its dollar reserves, the bank said importers could no longer get hard currency to buy 41 items, ranging from toothpicks and rice to steel products and private jets.

    One of such measures –  the  total ban on the use of debit cards abroad, has caused panic in both the local and international markets with customers feeling the pangs of the policy, which was meant to conserve foreign reserves and protect the local currency.

  • Tomato paste importers seek review of forex policy

    Tomato paste importers seek review of forex policy

    Some importers have called on the Federal Government to review the Central Bank of Nigeria forex policy banning them from accessing foreign exchange from the official window just as indigenous producers are saying that the restriction is a welcome development in restoring agriculture as the main stay of the economy.

    Labour union officials in some of the local tomato processing companies have called on the presidency to prevail on CBN to review the forex policy listing of triple concentrate tomato paste among the 41 items banned from accessing foreign exchange from the official window by the Central Bank of Nigeria as the inability of the firms to import tomato concentrate which is the main raw materials used in their production process had drastically affected them.

    According to the President, National Union of Food, Beverage and Tobacco Employees, Lateef Oyelekan, the companies involved should be given the latitude to plan for backward integration as one of the downside of the policy is that it could lead to massive job losses, as an estimated 1000 jobs are likelyto be lost in the tomato process manufacturing sector.

    “The jobs of the workers are at stake unless the ban is reversed, and that the opportunity for backward integration would be lost by the affected companies.”

    According to him, the quantity of the produce being cultivated presently in the country is not enough for local consumption and the quality is not good enough to be processed into paste. However, Mr. Felix Aigoro, an Agricultural Expert with over 20 years experience in tomato farming, pointed out that Nigeria produces high quality tomato and is ranked the 2nd largest producer of tomato in Africa and 13th in the world with a total production estimated at 1million hectares of land producing 1.701 million tonnes per annum with average of 20-30 tons/hectare yet Nigeria remains the largest importer of tomato from China.

    In an interview with The Nation, the Agricultural expert on tomato adviced those clamoring for the review of the CBN forex policy to rather ask Government for greater aid and support towards granting low interest loans, infrastructures, steady energy and creating enough tomato processing plants.

    “It is estimated that between 35 per cent and 40 per cent of the total agricultural produce in the country is lost due to absence of non- provision of processing facilities. This has resulted in cycles of scarcity and plenty of fluctuations in prices”, regretted the tomato farmer.

    Decrying the unfortunate situation, the tomato farmer said that Nigeria imports 65,809 tonnes of processed tomato annually worth over N11.7 billion despite its massive local production adding that the trend may continue if adequate processing and storage mechanism is not developed and put in place.

    “Take for instance, a recent survey has revealed that most of the brands in the market are imported and the presence of local brands is scarcely noticeable’’, he said

    Speaking further, he said that although more than 200,000 Nigerian farmers grow tomato, not one of the more than 50 tomato paste brands for sale is made from their produce resulting in half rotting in the fields before reaching the market.

    “The market is assured for any entrepreneur who comes out with good quality brands because tomato products are in daily use, have high repeat sales tendency and a long cycle therefor establishing more tomato fruit processing plants in the country will go a long way towards utilizing the enormous quantities of fresh tomato that go waste for lack of processing and preservation especially during post harvest periods of plenty.

    Reacting to the statement that local production may not be enough to meet demand and the quality of the locally grown tomato may not be good enough to be processed into paste, Mr. Aigoro who has a 1st and 2nd degree in Agricultural science said that “Nigeria has the capacity to meet local demand and even for exportation and the quality of our tomato especially from the northern part of the country is top quality”.

    “We have seen a lot of improvement in the demand for our products especially our Life vegetable oil since the new CBN forex policy restricting importers of Vegetable oil from accessing foreign exchange through the official way” enthused Chris Chigbo, Executive Director of Chicason Group an indigenous company.

    Speaking, he noted that the restriction of imported finished products will greatly encourage local manufacturers who hitherto were finding it difficult competing in terms of price with most of the importers who were not even paying full duty on their products.

    “We are also happy with the increased tariff on imported lubricants. Before now, the market was filled with all brands of adulterated and substandard lubricants but with the increased tariff we now have some semblance of sanity in the lubricant market” said the Chicason, Director,manufacturers of A-Z oil.

    However he stated the need for a little review of the CBN forex policy on some raw materials which Nigerians are not yet producing enough to meet demand adding that restrictions on those materials will only make the manufacturers to source from parallel market which will  increase the price of the finished products.

    Also speaking on the policy, President of the Lagos Chamber of Commerce and Industry (LCCI), Remi Bello, while criticizing the policy, warned that most manufacturers might be forced to shut down and move their operations to neighbouring countries due to their inability to access foreign exchange for raw materials and other critical inputs.

    According to him, the government needs to first address the issue of post-harvest wastage emanating from inadequate storage and the absence of processing facilities and the development of agro-allied industry. “No matter how bounteous the nation’s harvest is, such productivity will count for little if the produce cannot be stored.” he said.

    However the CBN Governor, Godwin Emefiele noted that as a result of the policy, the bank has been able to conserve some foreign currencies with a lot of progress made on local production of the 41 listed items.

    According to reports, Nigeria imports 65,809 tonnes of processed tomato annually worth over N11.7billion.

    The CBN Governor clarified that “the Apex bank did not ban total importation of the said items but only restricted access of foreign exchange from official markets to the importers of those items that we think we can produce competitively locally so as to improve our local industries due to the challenges we have, due to the fall in crude oil revenue.”

    Appealing for more patience and understanding, from Nigerians and the people affected, he said that the Government and some other stakeholders are convinced that these items can be produced locally adding that forex can only be made available to those importing essential raw materials and goods that cannot be produced within the country.

  • Forex restriction: Nigeria loses 50% cargoes to Cotonou port

    Forex restriction: Nigeria loses 50% cargoes to Cotonou port

    The Shippers‘ Association, Lagos State, yesterday said 50 per cent of cargoes meant for Nigerian ports were being diverted to Cotonou port as a result of the Central Bank of Nigeria (CBN’s) forex restriction on some imported items.

    Its President, Mr Jonathan Nicol who spoke while speaking in Lagos, said many Nigerian shippers had diverted their cargoes to the ports in the Republic of Benin since the policy started, adding that there were less restrictions on imports in the West African country. Nicol said the development had deprived Nigeria a lot of revenue , urging the Federal Government to ease the policy to boost revenue.

    He said: “When the CBN forex restriction policy came into effect, we appealed to the Federal Government to review the policy and remove some critical items because it is hurting our business and the country‘s revenue. The reflection of that restriction is beginning to show up because we are having less cargoes in our ports. Rather than shippers bringing their cargoes to Lagos, they prefer Cotonou and they do their foreign transactions there because Benin Republic does not have such restrictions as we have.

  • Forex restriction: Nigeria loses 50% cargoes to Cotonou port

    Forex restriction: Nigeria loses 50% cargoes to Cotonou port

    The Shippers` Association Lagos State on Tuesday said 50 per cent of cargoes meant for Nigerian ports were being diverted to Cotonou port as a result of the Central Bank `s forex restriction on some imported items.

    The President of the association, Mr Jonathan Nicol made the disclosure while speaking in an interview with the News Agency of Nigeria (NAN) in Lagos.

    He said that many Nigerian shippers had diverted their cargoes to the ports in the Republic of Benin since the policy started, adding that there were less restrictions on imports in the West African country.

    Nicol said the development had deprived Nigeria a lot of revenue, urging the Federal Government to ease the policy to boost revenue.

    “When the CBN forex restriction policy came into being, we appealed to the Federal Government to review the policy and remove some critical items because it is hurting our business and the country`s revenue.

    “The reflection of that restriction is beginning to show up because we are having fewer cargoes in our ports.

    “Rather than shippers bringing their cargoes to Lagos, they prefer Cotonou and they do their foreign transactions there because Benin Republic does not have such restrictions as we have.

    “In fact our country have been depleting in cargoes to the extent that we have lost 50 per cent cargoes to the Republic of Benin, helping to make the Cotonou ports the largest in West Africa.

    “The Federal Government should kindly remove some critical items from the list to boost shipping business in the country and attract revenue to the country“ he told NAN.

    Nicol decried what he called the incursion of foreign shipping lines into the freight forwarding business in the country, saying the development was not good for the economy.

    “If foreigners with better resources and expertise are allowed to intrude into the business, it might render no fewer than 100,000 Nigerian freight forwarders jobless.

    “We do not understand why a foreigner will suddenly come from nowhere, claiming to be a Nigerian company and make incursion into the freight forwarding business.

    “Many Nigerians are engaged in this area and we think we might lose about 100,000 jobs to this problem.

    “The Federal Government has a Council for the Regulation of Freight Forwarding in Nigeria (CRFFN) and the mandate of the council is to train freight forwarders on the best standards.

    “Since we have people who can do this job locally, I do not think we should tolerate foreigners.

    “The government should ensure the business is reserved for our people to protect their jobs, “ the shipper said.

    He also urged Nigerians who backed the foreigners dominating the local freight forwarding business to have a rethink.