Foreign currency speculators, who launched an unprecedented attack against the naira in the last two weeks, got their fingers burnt on Tuesday when the nation’s currency staged a major recovery, rising to N310 a dollar at the close of business, compared to N375 at which it sold on Monday.
The naira fell to an all-time low of about N400 to a dollar on the parallel market last week fuelling concerns that it would plummet further to N450-N500/$ this week.
But findings showed that the naira defied expectations, climbing to as high as N305 to the dollar at some parallel market points in Lagos on Tuesday afternoon, before settling at N310.
Forex dealers and currency analysts attributed the significant gain on the parallel market to excess supply of the greenback in the market, even as it looked like a lot of speculators lost the shirts on their back.
According to Thisday reliable source, speculators who thought that by attacking the currency last week, coupled with misplaced concerns that the Central Bank of Nigeria (CBN) was going to stop the allocation of forex for school fees and medical bills abroad, this would compel the central bank and President Muhammadu Buhari to alter their stance against the devaluation of the currency.
But they were disappointed when Buhari, in Egypt at the weekend, adamantly ruled out the devaluation of the naira on the grounds that Nigeria does not have the competitive advantage to benefit from an official currency adjustment.
Reacting to the president’s stance, speculators who had been betting that the naira would depreciate further, started dumping the dollars with reckless abandon, effectively creating excess supply of the greenback in the parallel market.
Commenting on the situation in the secondary forex market, the chairman, Association of Bureau de Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, said: “The market is moving from perception to reality.”
Similarly, an analyst at Ecobank Nigeria, Mr. Kunle Ezun, predicted that the naira would edge higher in the coming days.
“We expect that the naira would appreciate further. We have always said that what happened last week was purely a speculative attack.
Some people felt that if they pushed the naira down to that level, they could force the CBN to devalue, so that when the naira is devalued and the gap widens further, they would now bring out the dollar cash to make a kill,” Ezun said.
He however urged the fiscal authorities to introduce policies that would help stimulate economic activities, saying that the fundamentals of the economy were still weak.
ABCON also aligned with the federal government’s decision not to further devalue the naira.
Gwadabe said this at a media briefing, pointing out that devaluing the naira would create more problems than it would solve.
He said that as a way of enhancing transparency in the BDC sub-sector, his association had decided to introduce a forex rate band weekly.
This rate band is expected to serve as a guide for all BDCs and the public on the prevailing exchange rate across the country, he added.
In addition, it will be operated in line with the regulated forex rate in the economy.
“This is to forestall exploitation of forex end users, and also to ensure that end users are informed to avoid falling victims of exploitation.
“The band will be announced via weekly press releases that will be circulated to the media for publication.
“ABCON will introduce a series of measures aimed at transforming the operations of BDCs in Nigeria to align with global best practices. These include: review and updating of BDC operational manual; introduction of live trading platforms; automation of all transactions and documentation requirements; and increased partnership with the CBN and other relevant agencies.
“Further, as part of its responsibility as a self regulatory organisation (SRO), and also in continuation of its aim to transform its members to compete within the global regulatory currency market, ABCON will seek the approval of relevant monetary and fiscal authorities as well as partnership for effective use of the nation’s external reserves to enhance domestic trade and foreign exchange management.
“To this end, our website and internet platforms will be developed to position BDCs to serve as agents of Western Union and currency auctioneers.
“We would also develop platforms that will allow our members to access sources of autonomous foreign exchange like govt agencies, embassies, IOCs and export proceeds, etc,” he explained.
He also urged the federal government to introduce policies that would diversify the economy to increase non-oil export earnings, and reduce imports.
This, according to him, would lead to increased foreign exchange inflow and a reduction in demand for foreign exchange.
In addition to policies that would diversify the economy, ABCON suggested that the CBN should review the policy of dollar importation into the economy for the purpose of defending the naira.
According to the association, the central bank should introduce a policy whereby the naira is used to intervene in the real sectors of the economy to boost productivity.
Furthermore, Gwadabe said as a way of reducing demand for dollars, the CBN should explore the option of promoting the use and acceptability of naira for transactions within the West African sub-region.
He added: “We observe that this is already happening at the level of informal trading activities within the sub-region, and it is our belief that this can be replicated at the level of formal economic activities.”
Meanwhile, the Chairman of Stanbic IBTC Holdings Plc, Mr. Atedo Peterside, has expressed concern over the uncertainty arising from the federal government’s foreign exchange policy, warning that it is threatening macroeconomic stability in the country and is unsustainable.
He stated this yesterday at the 2016 Standard Bank West Africa Investors’ Conference tagged, “Unlocking Nigeria’s Potential…Growth through Diversification”.
He said the federal government’s foreign exchange policy is the biggest uncertainty facing the country today following the lack of economic policy direction and the likely composition of Buhari’s economic team for much of the third and fourth quarters of last year.
According to him, “The argument at stake is not whether to devalue or not because there has already been an effective devaluation.
“The naira prices of various capital goods are now being ‘correctly’ priced purely on the basis of realistic expected replacement costs and so the economy is sliding towards an unpalatable scenario where the consumer suffers the ‘pains’ of devaluation (rising prices) without witnessing any of the expected ‘gains’ such as enhanced fiscal viability (in local currency terms at least) of the three tiers of government and increased competitiveness of Nigerian businesses.”
Peterside stressed that the much-craved economic diversification could only take place meaningfully if new capital investment activity takes place to take maximum advantage of increased domestic competitiveness.
“Sadly, most investors here – local and foreign – are currently caught up in a frenzied pursuit of the cheapest available dollars and the difference between losing this game and winning it can be as high as a mind-boggling 50 per cent on new transactions.
“The pursuit of scarce forex for today’s needs has understandably become the main game in town and this has exacerbated the pressures on Nigeria’s foreign exchange reserves and the naira via the one-way bet that is currently on against the naira, that is, everybody wants to take foreign exchange out and nobody really wants to bring it in,” he added.
He further stated that the excitement caused by the important development in Nigeria’s political landscape last year, where a change in government occurred at the federal level after a keenly contested election, has given way to some apprehension surrounding whether a populist government can take the necessary tough economic policy actions that are necessary to restore confidence and stimulate badly needed new investment activity.
MTN Nigeria’s MoMo Formally Commences Operation
MoMo has commenced a full commercial Payment Service Bank operations, today, 19th May, 2022
MTN Nigeria’s subsidiary company, MoMo has commenced a full commercial Payment Service Bank (PSB) operations, today, 19th May, 2022.
This comes after a successful trial that began on May 16, 2022, to commemorate the start of MTN’s GSM operations on May 16, 2001, and MTN’s listing on the Nigerian Exchange Limited on May 16, 2019.
Investors King had reported the CBN’s approval of this process some months back stating; “This is the first step in the process towards a final approval, subject to the fulfillment of certain conditions as stipulated by the CBN. The decision to issue a final approval is firmly within the regulatory purview of the CBN and we respect their right and judgment in that regard.
“MTN Nigeria affirms its commitment towards the financial inclusion agenda of the CBN and the Federal Republic of Nigeria and continues to explore means whereby it can contribute to its fulfillment…”
MoMo PSB is determined to enable millions of Nigerians to access a broad range of financial service products. With an expansive agent network of over 166,000 active agents and digitized partnership infrastructure, MoMo PSB will continue to expand its agent network in order to serve Nigerians across the country and eliminate friction from routine transactions by digitizing cash payments.
Customers can open a MoMo wallet, send money to any phone number in the country, and pay their bills by dialing *671# from any network.
Furthermore, MoMo wallets will allow Nigerians in the Diaspora to send money to any phone number in the country in the future, a crucial feature considering Nigeria’s position as the top recipient of remittances in Sub-Saharan Africa.
“We are grateful to the Central Bank of Nigeria (CBN) for their support and guidance through the process,” said Karl Toriola, CEO of MTN Nigeria. “This is an important milestone for MTN Nigeria in our mission to support the government’s drive towards financial inclusion in Nigeria.
Not just for those in urban centers and markets, but also people in the rural and remote areas of the country who remain excluded from the financial system,” he added.
MoMo PSB CEO, Usoro Usoro said: “Providing easy to use, accessible and affordable financial services to all Nigerians is essential to executing the CBN’s financial inclusion strategy and the digital inclusion agenda of the Minister of Communications and Digital Economy. We look forward to playing our part and are excited about the opportunities to partner with relevant institutions across various sectors to co-create and expand access nationwide.”
CBN Issues Directive For Open Banking to Improve Financial Services
In an effort to stimulate innovation and widen the range of financial products and services available to banks’ customers, the apex regulatory bank, the Central Bank of Nigeria (CBN), has established the legal framework for Open Banking in Nigeria.
This was revealed in a circular titled ‘Operational guidelines for open banking in Nigeria’ which was obtained by Investors King.
The Regulatory Framework for Open Banking in Nigeria, according to the CBN, establishes standards for data sharing across the banking and payments systems in order to stimulate innovation and expand the range of financial products and services available to bank customers.
According to the CBN, the financial sector data guideline would allow clients to access innovative financial products and services.
The Apex bank said: “Open banking recognises the ownership and control of data by customers of financial and non-financial services, and their right to grant authorisations to service providers to access innovative financial products and services. This is anticipated to drive competition and improve access to banking and payments services”.
The CBN also added that participants in open banking shall adhere strictly to security standards when accessing and storing data, and shall be subject to minimum privacy standards, operational standards, risk management standards and customer experience standards as prescribed by the Bank.
According to the CBN, any organization with customer data that may be transferred with other businesses in order to deliver innovative financial services within Nigeria is eligible to participate in the Open Banking ecosystem.
Open banking is a banking practice in which banks and non-bank financial organizations provide third-party financial service providers open access to customer banking, transaction, and other financial data via application programming interfaces (APIs).
Partnerships for Financial Education
Education, specifically financial education, is a critical tool to enable both individuals and communities to prosper
By Carl Manlan, Vice President, Social Impact, Visa CEMEA
In April 2022, a media company leveraged key partners to make on-demand mobile-based learning accessible to millions of young Africans. The model bets on the success of the entertainment platform to attract young people to take an extra step in strengthening their entrepreneurial skills. This highlights the importance of multi-stakeholder partnerships in ensuring access to skills and educational messages for Africa’s youth. Moreover, the critical importance of experience-based learning and platforms in advancing socio-economic transformation.
Over the years in the fight against AIDS, tuberculosis, and malaria, we have learnt about the effectiveness of purpose-led partnerships. The ongoing COVID-19 pandemic provided us with a sense of urgency in supporting individuals and households to take full advantage of the digital economy. The continent’s response to health emergencies suggest that we have the tools to push forward in creating a more inclusive society particularly in the areas of education and capacity development.
Education, specifically financial education, is a critical tool to enable both individuals and communities to prosper. Entrepreneurship holds some of the answers in alleviating unemployment in Africa, but it needs to come with the right set of skills and opportunities. Trace Academia, has taken the lead in bringing partners to offer a range of skills to millions of young Africans through their media platform. This rich content has re-imagined Visa’s Practical Business Skills to allow young people to learn lifelong transferable skills.
Leveraging the power of technology, both platforms have been able to bring relevant financial education content that changes the way the youth interact with entrepreneurial concepts. Skills development is one step in the right direction as we continue to collaborate with others to create opportunities for young people. The real impact is in the continuous application of these skills, which will help us navigate some of the challenges that affect youth and employment on the continent.
The Covid-19 pandemic accelerated preference for digital commerce and highlighted the opportunity of key stakeholders to come together to collaborate at the intersection of commerce and skills. Research shows 80 million young people will benefit from the rise of digital commerce in Africa by 2030 but this can only be enabled by access to adequate skills and relevant platforms.
Financial education starts at home and the role of parents and guardians cannot be over emphasized. Practical Money Skills is an online resource which provides content for children and youth grades K to 12. The end in mind is the ability to take control of your finances as an individual or as a household. As such, the fundamental habit of careful management of available resources at home builds the framework for financial education and financial consumer protection which ultimately leads to more communities being included in the financial system. As in the health sector, behaviour change communication and prevention are key factors in curbing the spread of a disease. In our case, financial education and protection are key tenants in spreading expertise and leveraging skills required for individuals to sustain their livelihoods and for entrepreneurs to expand their trade from local to global value chains.
Access to healthcare and financial education may, at first, be unrelated but the pandemic has exposed the fragility of the current economic system when skills are lacking. There is evidence suggesting that debt and financial concerns have a serious impact on mental health
Partnerships for Financial Education
. As such, people living in financial hardship are at increased risk of mental health problems and poorer mental wellbeing. Financial wellness is important for individuals and communities to continue to make a sustainable contribution to the continent.
Most critical diseases affecting the continent over the past half-century have been managed through partnerships. Today, more than ever, we can take a cue from the health sector to make financial education accessible to all, it is a life skill that should be valued.
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