•  Massive foreign portfolio ouflows continue to hobble markets
  •  Manufacturers lobby central bank for direct dollar sales

Obinna Chima with agency report

The exit by foreign portfolio investors from the country, as revealed by bank returns on the utilisation of foreign exchange bought from the Central Bank of Nigeria (CBN), has continued to take its toll on the country’s stock and fixed income securities markets.

This is just as the Manufacturers Association of Nigeria (MAN) has started to lobby the central bank to bypass commercial banks and sell dollars directly to its members, as it looks to counter a shortage of foreign currency it has said threatens thousands of jobs in the continent’s largest oil producer.

A review of bank returns on the use of forex allocations from the CBN, a total of $14 million of the funds sold to banks was for payment of foreign portfolio investors who were exiting the economy. This was evident in the returns reported by Stanbic IBTC Limited and Citibank Nigeria Limited.

Forex utilisation published by Stanbic IBTC and Citi revealed that they sold forex to portfolio investors that included CACEIS Bank, Luxemburg; Enko Opportunity Growth; KBL Private Bankers, Luxemburg; Northern Trust London; Milan/BNP Paribas; Duetche Bank, London; Meril Lynch International; Bank of New York; Standard Bank of New York; RBC Investor Services; Citi, London; and Standard Bank of South Africa.

Market capitalisation on the Nigerian Stock Exchange (NSE) closed at N8.882 trillion last Friday, representing a year-to-date decline of N876 billion, compared with the N9.758 trillion at the beginning of the year.

Similarly, exchange rate concerns have also forced a lot of investors in fixed income securities to sit on the fence in anticipation of naira devaluation.

However, other forex returns released by the banks showed that Guaranty Trust Bank Plc (GTB) with $31,305,912.75 reported the highest allocation for its customers.

GTB displaced Zenith Bank Plc, which got an allocation of $24,171,094.94 to come in second. Zenith Bank the week before posted the highest allocation from the CBN.

Zenith Bank was followed by Stanbic IBTC Limited with $18,867,993.86, while First Bank of Nigeria Limited with $17,308,943.83 came in fourth place.

Diamond Bank Plc reported returns of $15,500,472.08 to occupy the fifth place; Access Bank Plc – $14,263,557.32 occupied the sixth position; Ecobank Nigeria – $13,732,604.35 occupied the seventh place; while Union Bank of Nigeria reported returns of $11,064,740.69.

In the same vein, First City Monument Bank (FCMB) reported returns of $9,924,875.73, while Fidelity Bank’s returns on foreign exchange utilisation stood at $6,755,109.31.

Also, Wema Bank Plc reported $5,537,567.53, Citibank, $5,480,542.26 and Sterling Bank, $5,397,672.19.

Just like the previous weeks, invisibles such as school fees and business and personal travel allowances, in terms of volumes, accounted for the highest number of forex allocations, while other invisibles such as repatriation of capital, divestments by foreign portfolio investors from the equities and bond markets, accounted for a large chunk of forex purchases, in terms of value.

For GTB, its returns on utilisation of forex bought from the CBN showed that of the $31.305 million it was allocated, it sold $15 million (48 per cent) to the Dangote Group for the payment of interest on the company’s syndicated facility.

In all, GTB had 384 customers on its list, both corporates and individuals. Of this, payment for school fees abroad got the highest allocation in terms of volume, but it also sold dollars to some of its corporate customers importing raw materials, among others.

Zenith Bank also sold dollars to 491 customers, largely school fees, while some was for the importation of visible items.

Diamond Bank sold forex to 311 customers – 91 of them were importers of visible items, others were for school fees.

Access Bank sold dollars to 228 of its customers, but the distribution of its forex sales showed that some of its customers bought the greenback for repatriation of capital, payment for ticket sales, and importation of petrol or gasoline, among others.

FCMB had 201 customers on its list, with over 100 of them getting forex to import visible items such as petrol, raw materials and spare parts, among others, while others bought dollars to pay tuition overseas.

Meanwhile, the vice-president of MAN, with about 2,700 members, has proposed weekly auctions of dollars directly to manufacturers at a meeting with the CBN Governor, Mr. Godwin Emefiele, in Abuja, Bloomberg reported yesterday

The vice-president of MAN, Mr Ali Madugu, said the proposal was made last month.

“We’re calling for the central bank to start giving to us directly, hand-to-hand, rather than through the banks,” Madugu, who is also the managing director of Kano-based Dala Foods Ltd, a food processor, said in an interview in the northern Nigerian city last week.

“Some of our member companies will run out of raw materials next month. Without restocking, what will happen? Thousands of jobs are on the line.”

Nigeria, which derives about two-thirds of government revenue from oil, has rationed dollars and brought interbank forex trading to a halt since February last year in a bid to conserve foreign exchange reserves and prop up the naira. The measures have all but pegged the currency officially at N197-N199 per dollar.

As dollars have become more scarce, the black market exchange rate has plummeted to N310, while forwards prices suggest the naira will fall to N291 in a year.

Under the current system, the central bank sells forex to commercial banks which then distribute it to their customers. That has left manufacturers short since the banks often prioritise other businesses and individuals, Madugu said. MAN hopes to receive a response from the central bank this week, he said.

“The banks have everybody as their customers,” Madugu said. “They even have people buying dollars for medical bills and school fees. If the central bank believes the economy must be diversified and manufacturing given a boost, they should allocate directly to us.”

MAN has asked its members what their annual forex needs are so that it can give the central bank an indication of how big the weekly dollar sales would need to be.

According to Bloomberg, Mr. Ibrahim Mu’azu, a spokesman for the central bank, didn’t answer calls to his mobile or immediately respond to a text message seeking comment.