By Kelechi Mgboji
Assistant Business Editor
There is a significant drop in foreign exchange (forex) allocation to banks by the Central Bank of Nigeria (CBN), according to returns on forex utilisation published by financial institutions last week.
The CBN sold a total $130,755,294.59 to 14 commercial banks, four merchant banks, and the Bank of Industry (BoI). United Bank for Africa (UBA) bought the highest amount.
Total CBN sales were lower by $5,283,163.58, compared with $136,038,458.17 allocated the previous week.
UBA bought $18,500,803.50 followed by Stanbic IBTC ($17,859,696.51), First Bank ($14,215,272.40), Zenith Bank ($13,236,651.70), Diamond Bank ($11,489,227), Standard Chartered Bank ($10,730,263), and Guaranty Trust Bank ($8,918,388).
A total 222 customers purchased the greenback from the banks.
UBA sold dollars to 224 corporates importing raw materials, industrial items, and individuals paying school fees abroad.
Dangote Sugar grabs lion share
Dangote Sugar Refinery purchased the biggest amount of forex, having bought $6 million to import Brazilian cane raw sugar.
Other corporates which bought dollars from UBA included Stallion Motors ($1,082,132), NFE Industries ($1,454,269.80), and IATA ($1,500,000).
A total 134 customers bought forex from Stanbic IBTC Bank, largely for capital exportation from the equities, bonds, and money markets.
Stanbic IBTC remains dominant
Stanbic IBTC Stockbrokers, the capital market trading arm of the banking and investment management group, is the leading dealing member of the Nigerian Stock Exchange (NSE), and dominates equities transactions every month.
From the $14,215,272.40 allocation to First Bank, Dangote Cement and about 650 other customers bough $2 million to import machinery spare parts.
Zenith sold its $13,236,651.70 to 278 customers, the biggest being Tiger Branded Consumer Goods which purchased $1,285,774.87.
Diamond Bank’s biggest customer was A-Z Petroleum out of 177 that purchased $11,489,227 from the tier 2 bank.
A total 222 customers bought dollars from Standard Chartered Bank which got $10,730,263.
Following the exclusion of funding of fuel imports from the official forex market, the amount of dollars to be allocated to banks is expected to reduce further in subsequent deals.
Naira slips to N350/$
As for the naira, it has slipped to between N345 and N350 per dollar in the black market, amid jump in demand for dollars by oil importers and speculation that the CBN will make the exchange rate more flexible.
However, on the official interbank market, the naira is quoted at N197.50 to the dollar, near the official peg of N197.
It had exchanged for about N340.86 to the dollar on the parallel market before news filtered in suggesting the government intends to make forex more flexible.
Reuters news quoted Aminu Gwadabe, chairman of Association of Bureau de Change Operators of Nigeria (ABCON), as saying that “more speculators are taking a position in the market, causing dollar scarcity and fall in the value of the local currency.”
The government has announced that fuel importers are now allowed to get dollars from the parallel market to help ease acute shortages, and that may result in higher demand for dollars, and more pressure on the naira, as importers increase orders.
Hope of forex policy review
Currency traders said they are hopeful the CBN will soon review its rigid forex policy.
“Banks are already calling the CBN to get clarity on the next move concerning the naira exchange rate.
“Our expectation is that the bank will provide some form of clarification on the next step on the naira,” a senior banker who pleaded anonymity told Reuters.
“Hopefully, we shall soon have a more flexible exchange rate in the next couple of days based on the pronouncement of the government in recent times,” a currency dealer said.
The CBN banned dollar sales to bureaux de change (BDCs) in January and reduced supply at its official interbank forex market to conserve foreign reserves, now at their lowest levels.
Osinbajo triggers speculation
Vice President, Yemi Osinbajo, has announced that Nigeria is re-evaluating its forex policy and a flexible approach is in the offing.
“We expect that with a more flexible policy, we will be able to attract more capital into the system and ease business,” Osinbajo said at an investors’ conference organised by Renaissance Capital in Lagos.
“We expect that very soon we will see a more flexible approach to the currency.
“We believe there must be some substantial re-evaluation of the foreign exchange policy, especially with a view to increasing foreign exchange supply, encouraging capital importation and also being able to allow free flow of remittances.”
