- Stanbic IBTC, Zenith, First Bank, GTB lead
By Obinna Chima
As the Central Bank of Nigeria (CBN) continues with its demand management policy in foreign exchange (forex) allocation to financial institutions, the returns on foreign exchange utilisation have shown that it sold a total of $2,177,999,996 to commercial and merchant banks as well as the Bank of Industry (BoI) between March 1st and May 31st 2016.
A breakdown of the weekly returns on forex utilisation compiled by THISDAY showed that while in March 2016, the banking sector regulator sold a total of $921,352,549 to banks, and $669,405,241 in April, the financial institutions were allocated a total of $587,242,206 in May. The report however showed a gradual decline in the monthly forex sale by the central bank.
The computation, however, did not capture total returns of all commercial and merchant banks in the country, as their reports were not made available to THISDAY, while Skye Bank Plc did not publish in April and May 2016.
The report was sufficient, nonetheless, to show that actual demand for forex stood at almost $21.800 billion during the three months, given that the CBN only managed to meet about 10 per cent of banks’ demand for forex through its demand management policy.
A top bank official had told THISDAY that the returns were not in any way reflective of total demands by the banks on behalf of their customers, adding that what the central bank was trying to address were the backlog of forex demands.
“On average, our returns or allocations are just about 10 per cent of total demand, which means that the CBN is unable to meet forex demand on the official market.
“It is for this reason that there is so much pressure on the parallel market, where businesses that are unable to get their forex requirements met through the official window decide to turn to,” the bank CEO had explained.
Forex allocations in the three months reviewed by THISDAY ranged from fuel importation, machinery, payment for syndicated loans, pharmaceutical imports, importation of industrial raw material all the way down to school fees and personal travelling allowances.
Allocation for the payment of tuition fees overseas was one of the most numerous items. Also, other invisible items such as business and personal travel allowances, repatriation of capital, and divestments by foreign portfolio investors from the equities and bond markets accounted for a large chunk of forex purchases, in terms of volume.
The Dangote Group, Bua Sugar, Rahamaniya Oil and Gas, Forte Oil, Eterna Plc, and IATA which purchased $1.5 billion for ticket sales remittance, Matrix Energy Limited and Dozzy Oil were some of the biggest buyers of forex in the three months reviewed.
Based on THISDAY’s computation, Stanbic IBTC got the highest forex allocation between March and May, with a total of $229,648,443. A breakdown of this showed that the bank got $100,590,105 in March, $62,939,062 in April and $66,119,366 in May. The bank sold the dollars it purchased from the central bank mostly to foreign portfolio investors exiting the Nigerian money and capital markets.
Stanbic IBTC was followed by Zenith Bank Plc, whose computation showed that it was allocated a total of $213,859,887 in the three months under review. A breakdown of the dollars it received from the central bank for sale to its customers showed that in March it got $102,279,505; April -$62,137,299 and May – $49,443,083.
First Bank Nigeria Limited came in third with a total of $213,771,851. The breakdown showed that in March, First Bank was allocated $79,428,530, April -$74,673,190 and $59,670,131 in May.
Guaranty Trust Bank Plc (GT Bank) held the fourth position with a total allocation of $209,562,580. The bank was allocated $102,565,144 in March, $67,146,192 in April and $39,851,244 in May. Diamond Bank Plc came in fifth with a total forex allocation of $185,678,038.
Meanwhile, the market is currently awaiting the modalities for the proposed flexible exchange rate to be introduced by the central bank.
The CBN, which met with bank treasurers early last week, also met with the Nigeria Labour Congress (NLC) at the weekend as it continued to engage stakeholders on its policies.
NLC Vice-President, Mr. Issa Aremu, who spoke at the forum, said among other things discussed at the meeting, labour requested “clarification on what this flexible exchange rate means for us and he said the modalities are still being worked out. But the bottom line is that it would not do prejudice to the value of the naira”.
But in his response, the acting Director of Communication at the CBN, Mr Isaac Okoroafor, said: “The modalities have not been released. The governor has explained that we have to find a way of creating some flexibility around the foreign exchange management as it is today and the details would be released in due course.”