The four banks that have fully met the criteria are
FirstBank of Nigeria Limited, Zenith Bank Plc,
United Bank for Africa Plc and Guaranty Trust
Bank Plc.
FirstBank of Nigeria Limited, Zenith Bank Plc,
United Bank for Africa Plc and Guaranty Trust
Bank Plc.
Further analysis of the top 10 banks in the
country, going by CBN’s criteria, shows that about
four others may have also qualified with
additional four close to meeting the benchmark.
The banks are Access Bank Plc, Diamond Bank
Plc, FCMB Plc, Fidelity Bank Plc, which have
some of the key requirements as at end of 2015
and are expected to have qualified by the first
quarter of 2016.
Access Bank, GTB, FirstBank, Zenith and UBA
have been leading in volume of bids and
allocation of foreign exchange from the CBN
weekly foreign exchange trading since last year.
Industry observers believe that other banks
expected to jostle for the ninth and tenth
positions should CBN decide to move up the list,
include Stanbic IBTC Bank Plc, Skye Bank Plc and
Sterling Bank Plc, but their financial positions
could not be ascertained due to non-availability
of their financial reports as at end of 2015 and
first quarter of 2016.
Also, Ecobank Nigeria is expected to make the
top 10 but their financial reports were US dollar
denominated and could not be immediately
translated into Naira due to the transitional
exchange rate as at today.
While announcing the new foreign exchange
regime two days ago, CBN had indicated a two-
level trading structure where the apex bank would
deal on wholesale basis with some banks that
would in turn transact with other banks to be
known as non-primary dealers, and other dealers
at lower retail volume.
In this connection CBN stated: “To improve the
dynamics of the market, the apex bank will
introduce Foreign Exchange Primary Dealers
(FXPD), who would be registered with the CBN to
deal directly with the apex bank for large trade
sizes on a two-way quotes basis
“These primary dealers shall operate with other
dealers in the inter-bank market, among other
obligations that will be stipulated in the Foreign
Exchange Primary Dealers (FXPD) Guidelines.
“There will be no predetermined spread on
foreign exchange spot transactions executed
through the CBN intervention with primary dealers,
while all foreign exchange spot purchased by the
authorized dealers are transferable in the inter-
bank foreign exchange market.”
CBN meets banks’ treasurers
Also, the CBN will today meet banks’ treasurers
to clarify issues relating to the operations of the
flexible exchange rate regime.
A CBN source told Vanguard: “We are going to
meet with bank treasurers in Lagos tomorrow
(today) to discuss operations of the new system.
The meeting is to provide further explanations on
how the new system will operate and also
respond to questions and concerns over the
guidelines released yesterday.”
In the same vein, Vanguard learned that the
Financial Market Dealers Quote, FMDQ, met with
foreign exchange dealers of banks, yesterday.
A source with knowledge of the meeting told
Vanguard on condition of anonymity that the
meeting was to discuss parameters for interbank
trading in the new foreign exchange regime
commencing Monday.
The source said: “The meeting was to agree or
to determine the spread between the offer and
bid rates as well as the standard volume of
trade. The standard volume of trade is the
volume of dollars, whether $100,000 or
$200,000, banks will bid and offer to trade
among each other.
“This will be determined by the total volume of
dollars in the system. At the commencement of
the new system on Monday, dollars in the
system will be determined by how much the CBN
sells to the Primary Foreign Exchange Dealers
(FXPDs).”
Ecobank projects N280-N320/$ interbank rate
Analysts at Ecobank have projected that the Naira
will depreciate to between N280 to N320 per
dollar in the interbank market in the short term.
In a comment on the new foreign exchange
regime, they stated: “While the CBN did not
announce any exchange rate, it is our opinion that
a new exchange rate will emerge from the
interbank exchange market, which will likely be
above the current rate of $1:N197, at which the
CBN has been selling dollars to banks.
“We think this rate is initially likely to be around
$1:N285-320 as pent-up demand for dollar is
released onto the market. Over time, the move is
likely to increase the supply of US$ liquidity to
the interbank market as remitters and exporters
are likely to be more willing to sell dollars at the
interbank rate.
“Similarly, we believe that investors, who have
been sitting on the sidelines for fear of not being
able to get dollar out of the economy, will now
be more willing to commit. Overall, this greater
flexibility will be positive for the economy as it
will improve access to foreign exchange (albeit it
at a higher rate) for firms which have been
struggling to buy hard currency.
“The inflationary impact, we believe, will be fairly
limited because many importers who were
accessing dollars were already doing so on the
inefficient parallel market.”
It’s good for manufacturers —CardinalStone
Partners
Irrespective of the exchange rate, financial
analysts at CardinalStone Partners, a Lagos-based
investment house, said the take-off of the long-
awaited flexible foreign exchange regime is a
positive development as it will improve
accessibility and supply of forex.
According to them, “local manufacturers will be
able to source forex to purchase the requisite
inputs and this will have a corresponding positive
impact on economic growth, particularly the
industrial sector.
“Secondly, this move will attract capital inflows
as foreign investors, who were on the sidelines,
will return to the market. We are also likely to
see a return to the JPMorgan and Barclays Bank
Government Bond Indices.”
Stock market continues rally with N206bn gain
The Nigeria stock market, yesterday, maintained
its upward trend as total value of listed shares
rose by N206 billion, indicating continued
positive reaction by investors to the adoption of
flexible exchange rate policy by the CBN.
Economists and investment bankers had said the
market would continue to rally in the days ahead
as local investors take position ahead of return of
foreign portfolio investors.
Nigerian Stock Exchange, NSE, benchmark
indicator, the All Share Index, ASI, rose 2.2 per
cent to 28,489.89 points from 27,891.96 points,
on Wednesday, while the second key
performance indicator, the market capitalisation
(or total value) of listed equities rose by N206
billion to close at N9.78 trillion from N9.6 trillion
the previous day, also representing 2.2 per cent
increase.
The rally, yesterday, cut across all sectors in the
market with the exception of Alternative Securities
Market (AseM) that fell by 0.2 per cent. The
banking sector recorded the highest increase of
7.3 per cent to finish at 295.34 points on the
back of gains on the shares of mid cap banking
stocks like Unity Bank Plc and Wema Bank Plc,
as well as 5.58 per cent gains on the shares of
Zenith International Bank Plc.
The consumer goods sector followed, rallying 2.8
per cent as a result of appreciation on the shares
of brewery gaint – Nigerian Breweries Plc and
Champion Breweries Plc, while industrial sector
rose 2.1 per cent to settle at 2,040.95 points.
The NSE 30 Index was up 2.2 per cent to
1,265.73 points from 1,238.02 basis points.
The insurance sector recorded 1.6 per cent
increase propelled by surge in Mansard,
Custodian and Allied Insurance and Continental
Reinsurance, which rose by five per cent, 4.86 per
cent and 4.59 per cent in that order.
For every two gainers in the day, there was a
loser. Champion Breweries Plc led the advancers
with 9.87 per cent increase to close at N3.34,
followed by Unity Bank Plc with 8.33 per cent
gains to close at N1.17. Lafarge WAPCO
appreciated by 7.29 per cent to close at N74.01;
Wema Bank rose 6.33 per cent to close at
N0.84, while NB closed as the last on top five
gainers table with 5.99 per cent increase to close
at N141.76 per share.
Market breath also closed higher with volume
traded stood at 618.25 million shares valued at
N5.41 billion in 6,757 deals.
IMF welcomes new forex regime
Meanwhile, The International Monetary Fund, IMF,
yesterday, welcomed the decision by the CBN to
abandon its currency peg and adopt a flexible
exchange rate policy, saying this was important
to reduce fiscal and external imbalances.
According to Reuters, IMF spokesman, Gerry
Rice, told a weekly news briefing the Fund
wanted to see how effectively the Naira exchange
market functions once the new float system is
put into effect on Monday.
Reuters also indicated that CBN governor, in a
letter to President Muhammadu Buhari, said the
apex bank expected the Naira to settle at around
N250 to the dollar, as against the peg of N197 to
the dollar it had held for 16 months now.
“I think the announcement yesterday (Wednesday)
to revise the guidelines for the operation of the
Nigerian interbank foreign exchange market is an
important and welcome step,” Rice told
reporters.
“It will provide greater flexibility in that market,
the foreign exchange market,” Reuters quoted
IMF.
Senior IMF officials, including Managing Director,
Christine Lagarde, have urged Nigerian officials to
allow the Naira to fall to absorb some of the
shock to the economy from a plunge in oil prices
and revenues. OPEC member, Nigeria, is a major
oil producer. IMF officials have said that Nigeria
had not requested IMF financial assistance, but
had been in consultation with the Fund on dealing
with budget shortfalls.
Rice said: “As we have said before, a significant
macroeconomic adjustment that Nigeria urgently
needs to eliminate existing imbalances and
support the competitiveness of the economy is
best achieved through a credible package of
policies involving fiscal discipline, monetary
tightening, a flexible exchange rate regime and
structural reform. Allowing the exchange rate to
better reflect market forces is an integral part of
that.”
CBN unveils N500bn fund to boost non-oil
exports
Meanwhile, the CBN, yesterday, unveiled a N500
billion low interest rate credit fund designed to
boost non-oil exports.
Announcing the introduction of the facility, the
CBN said: “The Non-Oil Export Stimulation
Facility, ESF, was established to diversify the
economy away from oil and to expedite the
growth and development of the non-oil export
sector.”
According to the guidelines for operating the
fund, “the CBN will invest in a N500 billion
debenture to be issued by Nigerian Export-Import
Bank (NEXIM) in line with section 31 of CBN Act.
The Nigerian Export-Import Bank (NEXIM) shall
be the managing agent of the Non-Oil Export
Stimulation Facility (ESF). It shall be responsible
for the day-to-day administration of the facility
and rendition of periodic reports on the
performance of ESF to CBN.”
On the interest rate to be charged on the loans,
the guidelines stated: “Facilities with a tenor of
up to three years would be granted at a
maximum all-in interest rate of seven and half
percent (7.5 per cent) per annum; facilities with
tenor of over three years would be granted at a
maximum all-in interest rate of nine percent per
annum.”
The fund can be accessed to fund export
oriented activities including, “Export of goods
wholly or partly processed or manufactured in
Nigeria; export of commodities and services,
which are permissible and excluded under
existing export prohibition list; Imports of plant
and machinery, spare parts and packaging
materials, required for export oriented production
that cannot be produced locally; export value
chain support services such as transportation,
warehousing and quality assurance infrastructure;
Resuscitation, expansion, modernization and
technology upgrade of non-oil exports industries
and; Stocking Facility/Working capital.”
On the duration and limit of loans accessed
through the fund, the guidelines stated: “The
facility shall not exceed 70 per cent of the total
cost of the project or transaction subject to a
maximum of N5 billion.
“The ESF shall have a tenor of up to 10 years
and shall not exceed December 28, 2025.
Stocking facility shall be for a maximum tenor of
one year with the option of roll-over not
exceeding twice.
“However, this shall attract an additional fee of
0.25 percent per annum of the loan amount and
is subject to approval of CBN. Working capital
facility shall be for a maximum tenor of one year
with the provision of roll-over not exceeding
twice. However, this shall attract an additional
fee of 0.25 percent per annum of the loan
amount and is subject to approval of CBN.”
The CBN has also extended the Export
Rediscounting Facility of the Nigeria Exim Import
Bank, NEXIM, by N50 billion.
This, according to the apex bank, is to “to ensure
continuous flow of credit to the export sector at
competitive rates, especially against the
background of declining export loans and the
need to promote sustainable non-oil exports, and
also to support the Deposit Money Banks, DMBs,
in the provision of pre-and post-shipment finance
to exporters to undertake export transactions.”
Composed by By Emeka Anaeto, Economy
Editor, Babajide Komolafe & Nkiru Nnorom
Editor, Babajide Komolafe & Nkiru Nnorom
