The Nation Newspaper

Tag: stabilises

  • Analysts rule out forex regime change as naira stabilises

    Analysts rule out forex regime change as naira stabilises

    The monetary policy authorities have executed exchangerate policies that are successful in many ways, and have grown greatly in confidence, analysts at FBN Capital, an investment and research arm of FBN Holdings have said.

    According to them, the economic managers are not under pressure to change tack, especially as it concerns official rate for priority transactions.

    “Forex has has become widely available. Manufacturers have it, as do middle class Nigerians with bills to pay outside the country and offshore portfolio investors. Further, its price is stable, and the Central Bank of Nigeria (CBN) even thinks it should fall,” the analysts said in an emailed report released on Monday.

    They believe that with the ongoing drop in inflation figures, the monetary authorities may try rate cut, which will be the first since July 2016.

    “On the monetary easing on falling inflation, we expect the first rate cuts since July 2016 in response to slowing inflation in first half of 2018. Positive base effects are coming into play, and we see easing of 150basis points over the full year,” they said.

    Also, the naira at the weekend, closed flat at N363 to dollar in the parallel market. It has remained at that position for nearly three weeks, market data on exchange rate position have shown.

    This raises hope that the era of forex volatility may have given way to long-term stability as the CBN continues to meet demands at the retail end of the market.

    At the official rate, the naira has also remained at about N306.05 to the dollar for nearly six months, although only few sectors can access funds at this rate.

    Traders insist that the naira will remain stable this year as the CBN continues its regular dollar injections into the forex market.

    Series of dollar injections into the economy totalling about $8 billion since February have helped the CBN to achieve long-term naira stability and curb volatility in the forex market.

    The CBN has in the last nine months sustained its weekly dollar interventions in the forex market, a large part of it go into the interbank market, bureau de change (BDCs), Retail Secondary Market Intervention Sales (SMIS), wholesale spot and forwards auction segments, agricultural, airlines, petroleum products and raw materials and machinery sectors, among others.

    The dollar injections were made to enable stakeholders in these segments secure enough forex for their operations, and in the process boost naira’s stability.

    Noteworthy, the gap between official and black market rates started to shrink since last February 20, when the CBN resumed dollar interventions in key segments of the economy. Industry sources said the CBN has injected over $8 billion in the last nine months into key segments of the market.

  • Bank of Ghana keeps rate at 19% as cedi stabilises

    Bank of Ghana keeps rate at 19% as cedi stabilises

    Ghana’s central bank kept its benchmark interest rate unchanged after the government sold $1 billion in Eurobonds and began talks with the International Monetary Fund, helping to revive confidence in the economy.

    The Monetary Policy Committee maintained the rate at a decade-high of 19 per cent, Governor Kofi Wampah said.

    That matched the forecasts of eight of 10 economists surveyed by Bloomberg. Two analysts predicted an increase of 50 basis points to 100 basis points.

    Ghana is struggling to contain an economic crisis that’s pushed inflation to 16 percent in August and caused the currency to lose a third of its value against the dollar this year, the worst-performing currency in sub-Saharan Africa. The cedi has gained 9.2 per cent in the past month after the government said it will seek support from the IMF.

  • AMCON stabilises banks with N7.6tr

    The Asset Management Corporation of Nigeria (AMCON) has spent N7.6trillion through the Banking Sector Resolution Cost Fund (Sinking Fund) to stabilise the banking sector, a survey conducted by Financial Derivatives Company (FDC) Limited has revealed.

    The report titled: ‘AMCON: Leading Stabiliser Among Peer Countries’ released yesterday and endorsed by FDC Managing Director, Bismarck Rewane said the expenditure also included a carrying-cost for the banks. Rewane said the first in the series of AMCON bonds for the exercises have been redeemed without any systemic disruption.

    “The AMCON model of financial stabilisation involves a sinking fund set up by the banks to underwrite the funding cost of the detoxification of the system-wide risk asset portfolio. The total amount of the exercise including carrying cost is estimated at $47.5 billion (N7.6 trillion). The first in the series of bonds have now been redeemed without any systemic disruption,” he said.

    Rewane said the size of the banking crisis relative to the economy showed that 21 per cent of nominal Gross Domestic Product (GDP), 35.8 per cent of total banking assets and 71.6 per cent of total banking deposits were all at risk. He said banking systemic crisis in the country is historically a post devaluation phenomenon adding that the naira remains stable for approximately five to six years before a drastic adjustment.

    “The consequence of significant currency depreciation in a country with a high propensity to import cannot be overemphasised. The overvalued exchange rate is the most important factor price in Nigeria and source of elite subsidy. Thus, whenever there is devaluation, it almost leads to a sharp reduction in the exchange rate subsidy whilst magnifying the cross border risk impact on the risk asset portfolio of banks,” he said.

    He explained that in the past, when banks failed, Nigeria Deposit Insurance Corporation (NDIC) paid depositors after many years up to the maximum of its guarantee. The larger depositors, he said, lose their fortunes and savings leading to a flight to quality and more banks especially new ones become fragile and pushed closer to the borderline.

    He explained that the 2009 banking crisis was unique in that bank managements were sacked and the Central Bank of Nigeria (CBN) put in place interim management teams. “The AMCON option was post the interim management process. Therefore, AMCON as an institution was set up with a limited life as a tactical response to self and externally induced crisis. Therefore, AMCON will need to be a strategic institution that will serve the purpose of stabilising the banking industry through its peaks and troughs,” he said.

    The report which reviewed the operations of bad banks in five countries that cut across four continents globally. The countries include the United States, Sweden, Ireland, Malaysia and Nigeria.

    He said the countries were chosen based on their similarities with respect to the magnitude of the crisis, the spread, and duration of the crisis, but to name a few. “Based on this evaluation grid, AMCON was tied in first place with Malaysia, Sweden was third, the United States of America came in fourth and Ireland was fifth,” he said.

  • N400b fund stabilises interbank market

    The interbank market which was volatile after the Cash Reserve Ratio hike by the Central Bank of Nigeria (CBN) is beginning to stabilise as the policy influence on the financial market wanes. The rate which was as high as 55 per cent in September dropped to 10.54 per cent for call funds, last Friday, writes COLLINS NWEZE.

     

     

    The interbank market was relatively steady last week Friday after the Central Bank of Nigeria (CBN) announced to foreign exchange traders, a market liquidity value of N400 billion for the day.

    The CBN, daily, gives market liquidity update to traders which guides their decision on that day. The market liquidity for last week Thursday stood at N600 billion.

    Data from the Financial Market Dealers Association of Nigeria showed that as at Friday, call rate stood at 10.54 per cent, seven-day 11 per cent, 30-day 11.62 per cent, 60-day 12.08 per cent while 90-day funds was traded at 12.37 per cent.

    Market liquidity is an asset’s ability to be sold without causing a significant movement in the price and with minimum loss of value. Money or cash at hand, is the most liquid asset, and could be used immediately to perform economic actions like buying, selling or paying debt and meeting immediate wants and needs.

    Currencies analyst at Ecobank Nigeria, Olakunle Ezun told The Nation on phone that the stability reflected improved market liquidity from treasury bills and Open Market Operation (OMO) repayment, and to a lesser extent, redemption of sovereign debt notes. The CBN sold N94.3 billion of 91-day, 182-day and 364-day treasury bills last Wednesday.

    It sold N32.8 billion of 91-day; N30 billion of 182-day and N31.4 billion of 364-day on competitive and noncompetitive basis. The stop rates were 10.8 per cent, 11.58 per cent and 11.7 per cent.

    He said the call/overnight and seven-day money market rates were at 10.5 per cent and 11 per cent while three month Nigeria Interbank Offered Rate (NIBOR) was 12.5 per cent, though less activity is done on the tenor.

    The inter-bank secured lending (Open Buy Back) rose 10.33 per cent for commercial banks and 10.5 per cent for discount houses last week Wednesday.

    Meanwhile, the CBN liquidity management remained active, supported by recent change to Cash Reserve Requirement (CRR), the circular issued on 1 August reviewing its guidelines for how banks access its Standing Lending Facility window and Wholesale Dutch Auction System forex auction, disclosed. There was also the latest CBN’s Monetary Policy Committee decision to hold rate unchanged at 12 per cent on September 24.

     

    Currency in circulation

     

    The volume of currency-in-circulation dropped to N1.44 trillion in August, representing a drop of about one per cent against the July figure, according to the CBN Economy report released last week.

    The report said the development, relative to the preceding month, reflected the fall in currency outside banks and vault cash, respectively. It added that the total deposits at the apex bank amounted to N6.5 trillion, indicating an increase of 7.5 per cent above the level as at the end of the preceding month.

    The development reflected the increase in commercial banks’ and Federal Government’s deposits, which more than offset the fall in private sector deposits.

    It said the introduction of the 50 per cent CRR on all public sector deposits in August, precipitated volatilities in most financial market indicators. It added that there was a reduction in the level of liquidity in the system due to the sterilisation of N896.43 billion and the delay in the release of fiscal allocation which did not impact on the banking system liquidity until August 26, 2013.

    It said the government’s bonds and treasury bills were issued at the primary market on behalf of the Debt Management Office (DMO) for the fiscal operations of the Federal Government, adding that the provisional data indicated that the total value of money market assets outstanding as at end of August, this year, was N6.5 trillion, indicating a decline of 0.1 per cent, in contrast to the increase of 0.3 per cent at the end of the preceding month.

     

    Bank directors

     

    Improved funding is needed to address infrastructure deficit and enhance the development of the economy, President, Bank Directors Association of Nigeria (BDAN), O’lorogun Sunny Kuku has said.

    He said Nigeria was at crossroads at this stage of her development, adding that fixing infrastructure through improved funding by banks will be beneficial to the economy.

    He said the forum which which the group will host soon, will have “Public Private Partnership Innovations in Public Sector Financing” as its theme. He said the theme was chosen because funding the infrastructural deficit in the economy remains the greatest challenge for all tiers of government.

    “Nigeria’s governance is peculiar with our funding structure wherein the tiers of government receive funds on a monthly basis and a greater percentage of revenues are allocated for recurrent expenditure. “This inevitably leads to regular capital funding deficits for majority of the leadership of the component states in the federation,” he said.

    Kuku advised government to consider other sources of funding for capital projects and social infrastructure adding that some state governments have already embraced Public-Private Partnership (PPP), either through outright concession, Build Operate Transfer (BOT) or Build, Own, Operate, Transfer (BOOT) with mixed results.

     

    Know Your Customer (KYC)

     

    Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), advised banks to strengthen the enforcement of Know-Your-Customer (KYC) policy of the CBN.

    GIABA Representative in Nigeria, Timothy Melaye, told The Nation that removing Nigeria from the list of countries identified as jurisdictions with significant deficiencies in Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) regimes was good for the country.

    He said banks should do more in ensuring that they understand their customers’ businesses better. According to him, Nigeria has taken the right steps including the establishment of legal and regulatory framework that will assist it meet its anti-money laundering initiatives, the Financial Action Task Force (FATF).

    GIABA said: “The FATF welcomes Nigeria’s significant progress in improving its AML/CFT regime and notes that Nigeria has established the legal and regulatory framework to meet its commitments in its Action Plan regarding the strategic deficiencies that the FATF had identified in February 2010. Nigeria is therefore no longer subject to FATF’s monitoring process under its on-going global AML/CFT compliance process. Nigeria will work with GIABA as it continues to address the full range of issues identified in its Mutual Evaluation Report.”

     

    Dollar exchange

     

    Christian pilgrims to Israel, Rome or Greece will get foreign exchange (FOREX) from the banks at N146 to a dollar, a CBN circular issued to all authorised dealers last week said.

    Eleven banks were enlisted by the CBN to sell forex to the pilgrims. The banks include Union Bank, Zenith Bank, United Bank for Africa, Fidelity Bank and First City Monument Bank. Others are Unity Bank, FirstBank, Ecobank, Sterling Bank, Skye Bank and Keystone Bank.

    CBN Director, Trade and Exchange, Musa Batari, who endorsed the circular, advised the banks to always comply with the sale conditions to avoid sanctions.

    The regulator had in a previous circular of October 14, pegged maximum Personal Travelling Allowance (PTA) sale to intending pilgrims at $1,000 at a concessionary rate of N146 to a dollar.

    “The Federal Government has approved the purchase of a maximum of $1,000 at a concessionary rate of N146 to a dollar by each intending pilgrim as Personal Travelling Allowance (PTA). Consequently, each pilgrim travelling to Israel is entitled to maximum of $750 while those going to Israel/Rome or Greece are entitled to a maximum $1,000,” the CBN said.

     

    ABCON

     

    The Association of Bureaux De Change Operators of Nigeria (ABCON) has said bureau de change (BDC) operators should comply with the anti-money laundering policy being implemented by the CBN.

    Recently, the CBN announced some measures to check money laundering tendencies observed in the foreign exchange market. These include the ban on importation of foreign currencies and suspension of 20 BDCs for not rendering returns and non-compliance with anti-money laundering regulations.

    ABCON Acting President, Aminu Gwadabe said the measures of the CBN were in line with the group’s position on compliance with regulatory requirements.

    “When it comes to the issue of non-compliance with regulatory requirements, especially rendering returns as well as compliance with approved limits for foreign exchange transactions, the association has a zero-tolerance position.

    “We have made it known to our members that we would not hesitate to impose sanctions or report to the CBN, any member found guilty of not complying with these requirements. So we are fully in support of the actions of the CBN,” he said.

    He said the action is necessary to ensure sanity in the foreign exchange market, and most importantly the stability of the naira, which is critical to our economy.

     

    Bank to bank report

     

    Wema Bank Plc said the N40 billion capital raised from shareholders will be channeled into growing its loan volume by over 60 per cent in the next few years.

    Its Chief Financial Officer (CFO), Tunde Mabawonku, said in an interview at the weekend that the lender was committed to growing its loan volume from N89 billion to between N150 billion and N160 billion over the next few years.

    He said management was aware that the expectations of shareholders were extremely high, adding that management was committed to ensuring that such expectations were met. He disclosed that over 90 per cent of the new fund will be used as working capital.

    “We are not spending any money in terms of infrastructure or strengthening of Information Technology (IT) base because they are already in place. As we have got this money now, it will be strictly used for business. In terms of business plan, our primary market simply remains the South-west, South-south and the Federal Capital Territory,” he said.

    He described last year as a challenging year for the lender as it was hampered by lack of capital and adverse effects of loan provisioning. He said: “Those two factors affected our operations in 2012, we had very low capital and were unable to do as much business as we had wanted to.”

    According to him, while that lasted, lending was slowed, but deposit mobilisation continued, adding that with the restrictions lifted, the lender was now on a path of growth.

    Fidelity Bank Plc funded the Alausa Independent Power Project (IPP) launched in Lagos last week, Lagos State Commissioner for Energy and Mineral Resources, Taofiq Tijani, said.

    Tijani, who spoke at the inauguration of the project, said the bank did not only provided the funds, but also followed the project to completion.

    He said power development and delivery was no longer a rocket science, adding that the state government had earlier inaugurated power plants at Akute, Marina, which are running.