Five banks dominate CBN’s $1.1b forex disbursements

Apex bank seeks bid for special auction
The Central Bank of Nigeria (CBN) said its foreign exchange utilisation records for banks showed a disbursement of $1.1 billion in November 2016.

However, of the 4,328 transactions in the period under review, five banks dominated the deals with 2,892, representing about 67 per cent of the total activity.

The development showed that CBN, despite its quest to increase reserves’ profile, sustained its forex market interventions, as a way to moderate Naira depreciation that is induced by demand pressure.

It also showed that while all the bank’s are participating in the forex market transactions, the bulk of the deals are mostly traded by few banks, particularly the big ones.

The banks with highest utilisation were First Bank of Nigeria, with 1,039 deals; Zenith Bank, 706; Stanbic IBTC, 397; Standard Chartered Bank of Nigeria, 389; and First City Monument Bank, 361.

Out of 25 financial institutions- commercial and merchant banks involved in the transactions, only 1,436 deals were left for the remaining 20 lenders.

A currency strategist in one of the banks with international operations confided in The Guardian that while the volume is commendable given the country’s earning capacity, it is still a far cry from industry demand.

Meanwhile, the apex bank yesterday asked lenders to bid in a special currency auction due soon, in efforts to clear backlog of demands from businesses.

The backlogs are particularly for fuel importers, airlines, raw-materials producers, and makers of agricultural chemicals and machinery for manufacturers.

In December 2016, CBN sold about $1 billion on the forward market to tackle the backlog of dollar demands, in an effort to support production and fulfill its pledge to the real sector operators.

Research analyst at FXTM, Lukman Otunuga, noted that CBN is aware that the nation still remains exposed to both external and internal risks, particularly exchange rate, despite improved outlook, which should keep the CBN on high alert.

“It must be understood that the cause behind the incessant rise in consumer prices is the disparity between the official and black market exchange,” he said.