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Naira Strengthens to N310 Against Dollar

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Naira

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 to 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.

A reliable source that 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.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Finance

Nigerian Banks’ Total Assets Rose by N11.15 Trillion

The Central Bank of Nigeria (CBN) has said the assets of Nigerian banks grew by N11.15 trillion to N64.32 trillion in the 12 months ended in April 2022.

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The Central Bank of Nigeria (CBN) has said the assets of Nigerian banks grew by N11.15 trillion to N64.32 trillion in the 12 months ended in April 2022.

In the report published by the apex bank, banks’ assets grew by 21% to N64.32 trillion in April 2022 from N53.17 trillion recorded in April 2021.

Kingsley Obiora, a member of the Monetary Policy Committee, in his personal statement released by the CBN, said the growth was driven by balances with CBN/banks, OMO bills, and credit to the real sector of the economy.

He said, “The banking system remained sound, stable and resilient. Total assets of the banking industry grew by 20.97 per cent from N53.17tn in April 2021 to N64.32tn in April 2022, driven by balances with CBN/banks, OMO bills, and credit to the real sector of the economy.

“As a result, the total flow of credit to the economy increased to N26.10tn in April 2022 from N21.45tn in April 2021, representing an increase of 21.66 per cent.”

Obiora explained that credit flow increased in the following sectors, manufacturing, consumer credit, general commerce, information and communication and agriculture.

On non-performing loans, non-performing loans in the banking sector stood at 5.31% at the end of April 2022, slightly above the 5% target of the apex bank and better than the 5.89% recorded in April 2021.

CBN said the improvement was due to the restructuring of facilities, efficient recovery strategies and sound management practices by Other Depository Corporations.

Mr. Johnson Chukwu, the Managing Director/Chief Executive Officer, Cowry Asset Management Limited, attributed the improvement to an increase in money in circulation.

He said, “One is the increase in money in circulation, and that increase is coming about because the Federal Government is borrowing by way and means and that is injecting liquidity into the economy and it will tremendously contribute to the level of currency in circulation, and ultimately the banking assets side.

“This is because given the level of financial inclusion, given that people hardly keep money at home, any significant increase in money in circulation will have an impact on the banks’ total assets.

“Secondly, the banks have actually seen a significant increase in loans. Loan creation also means money creation.”

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Banking Sector

Zenith Bank is Nigeria’s Best Commercial Bank for Second Consecutive Year

Zenith Bank Plc, Nigeria’s leading financial institution, has emerged as the best commercial bank in Nigeria for a second consecutive year at the World Finance Banking Awards 2022.

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Zenith Bank Award Presentation

Zenith Bank Plc, Nigeria’s leading financial institution, has emerged as the best commercial bank in Nigeria for a second consecutive year at the World Finance Banking Awards 2022. The leading bank was also named the best corporate governance bank.

The awards were in recognition of the bank’s sound digital transformation and best-in-class sustainability and corporate governance practices that over the years have led to a stellar business performance, even in a difficult economic climate like Nigeria.

At the awards presentation at the London Stock Exchange on Monday was the Group Managing Director and Chief Executive Officer, Zenith Bank Plc, Mr. Ebenezer Onyeagwu.

Speaking on the awards, Onyeagwu said “These awards reflect our strong business fundamentals, resilience and ability to adapt to the ever-changing dynamics of the market through our innovative solutions, as well as our commitment to global best practices. As a member and signatory to various domestic and international sustainability frameworks including the United Nations Global Compact (UNGC) and the Central Bank of Nigeria Sustainable Banking Principles, we continue to support the achievement of the Sustainable Development Goals (SDGs) by creating value for our shareholders, customers, clients, investors, communities and the environment through our practices, operations and investments.”

Onyeagwu went on to dedicate the awards to Jim Ovia, CON, the Founder and Group Chairman, for his pioneering role in building the structures and laying the foundation for an enduring and very successful institution; the Board for the outstanding leadership they provide; the staff for their commitment and dedication; and the bank’s customers for making Zenith Bank their preferred financial institution.

Zenith Bank’s track record of excellent performance has continued to earn the brand numerous awards, with these latest accolades coming on the heels of several recognitions including being voted as Best Bank in Nigeria, for three consecutive years from 2020 to 2022, in the Global Finance World’s Best Banks Awards; Best in Corporate Governance ‘Financial Services’ Africa, for three consecutive years from 2020 to 2022, by the Ethical Boardroom; Best Commercial Bank, Nigeria and Best Innovation In Retail Banking, Nigeria in the International Banker 2022 Banking Awards; and Bank of the Year (Nigeria) in The Banker’s Bank of the Year Awards 2020. Also, the Bank emerged as the Most Valuable Banking Brand in Nigeria in the Banker Magazine Top 500 Banking Brands 2020 and 2021, Number One Bank in Nigeria by Tier-1 Capital in the “2021 Top 1000 World Banks” Ranking by The Banker Magazine and the Retail Bank of the year at the BusinessDay Banks and Other Financial Institutions (BOFI) Awards 2020 and 2021.

Similarly, Zenith Bank was honoured as Bank of the Decade (People’s Choice) at the ThisDay Awards 2020 and emerged winner in four categories at the Sustainability, Enterprise, and Responsibility (SERAS) Awards 2021, carting home the awards for “Best Company in Reporting and Transparency”, “Best Company in Infrastructure Development”, “Best Company in Gender Equality and Women Empowerment”, and the coveted “Most Responsible Organisation in Africa.

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Finance

Bank Account Ownership in Nigeria Increased to 45% – World Bank

The number of unbanked adults in Nigeria continues to decline as the Federal Government through the Central Bank of Nigeria (CBN) intensified financial inclusion efforts.

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Global Banking - Investors King

The number of unbanked adults in Nigeria continues to decline as the Federal Government through the Central Bank of Nigeria (CBN) intensified financial inclusion efforts.

The percentage of adults with a bank account in Nigeria rose to 45% from 30%, according to the latest World Bank report titled ‘The Global Findex Database 2021’ obtained by Investors King.

The number includes all accounts with regulated financial institutions in Nigeria.

In part, the report reads, “Individual economies saw different rates of growth over the past decade. Between 2011 and 2021, economies such as Peru, South Africa, and Uganda drove up the average with account ownership increases of 25 percentage points or more.

“Uganda, in fact, saw its rate more than triple, from 20 per cent to 66 per cent. In India, account ownership more than doubled in the past decade, from 35 per cent in 2011 to 78 per cent in 2021. This outcome stemmed in part from an Indian government policy launched in 2014 that leveraged biometric identification cards to boost account ownership among unbanked adults.

“Other economies saw much smaller increases over longer periods. Pakistan, for example, grew by just 10 percentage points over the past decade, from 10 per cent in 2011 to 21 per cent in 2021. The Arab Republic of Egypt and Nigeria increased ownership by 18 percentage points and 16 percentage points, respectively—from 10 per cent to 27 per cent in Egypt, and from 30 per cent to 45 per cent in Nigeria.”

The Washington-based bank attributed the increase in account ownership in Nigeria and other African nations to growing mobile payment adoption.

It stated, “In Sub-Saharan Africa in 2021, 55 per cent of adults had an account, including 33 per cent of adults who had a mobile money account—the largest share of any region in the world and more than three times larger than the 10 per cent global average of mobile money account ownership.

“Sub-Saharan Africa is home to all 11 economies in which a larger share of adults only had a mobile money account rather than a bank or other financial institution account. The spread of mobile money accounts has created new opportunities to better serve women, poor people, and other groups who traditionally have been excluded from the formal financial system.”

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