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BDCs Seek FX Rate Review, Increased Allocation

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Forex Weekly Outlook October 31-November 4
  • BDCs Seek FX Rate Review, Increased Allocation

The Association of Bureaux de Change Operators of Nigeria (ABCON) has called on the Central Bank of Nigeria (CBN) to review the margin allowed to sell to customers from N2 to N10 and also increase foreign exchange (FX) allocation given to the sub-sector weekly.

The acting President, ABCON, Alhaji Aminu Gwadabe said this at an emergency meeting with Managing Directors/Chief Executive Officers of BDCs in Lagos yesterday.

However, Gwadabe and other operators at the meeting applauded the central bank for its improvement in supply, which saw BDCs receive $20,000 last week. But they argued the margin they are allowed to sell to end users at N2 was too small.

Gwadabe said: “We have told the regulators that margin is small. The margin of N2 is too small the CBN should review that margin to at least N10 per dollar.”

Furthermore speaking on the side-lines, he added: “The BDCs from the resolution have resolved to ensure that the challenge spike and volatility in the foreign exchange market. We would corporate with the central bank as we always do so that we narrow the gap between the parallel market and the also the official market.

“We are looking at a very acceptable target. There are lots of pressure from the IMF who says our naira is overvalued and also pressure from speculators, black market operators and people who carry hot money. “We are looking at a very acceptable margin between the official and the parallel rate at max it shouldn’t be more than five per cent.”

He also urged operators to abide by the rules and regulations of the association so as not to embarrass ABCON.

“We also advise the CBN to at least be accepting utilisation documents that comes from the association so that they can verify the documents our members are using to ensure that erring members are also being sanctioned from the market.

“On the issue of the BDC office where N450 million was found, we have done investigation and the thing is still under the security purview.

“But we can assure you that our investigation is on-going, we have identified the characters involve and we are going to write them to invite them. The reason we call this meeting is to say that we condemn it in entirety.

“If you are a member and you are found with N500 mill that is total abuse of the Know-Your-Customer policy. It is a total abuse of the cash transfer report, it is total abuse of the suspicious transaction report and that is the message we have told our members that they must respect those compliances.”

Also he said the association in collaboration with the Nigerian Interbank Settlement System (NIBBS) was working on a platform which would register end-users real-time to avoid infringements.

“Sometimes it is difficult to know that an end-user has used that passport. They so perfect it that even if you put stamp, they can go and clean it and represent it to you to buy dollars. So what we are doing with NIBBS is that there is a platform that they have developed whereby all the passport that buys dollars will be stored on that platform.

“So a BDC will just go into that platform and impute the passport number and it will show if that passport has been used by a particular bank or BDC.”

Furthermore, he said: “Since the CBN resumed selling dollars to BDCs, the market has gained more liquidity and naira strengthened to a large extent. The foreign exchange speculators have suffered major losses because of the role of genuine BDCs in helping the CBN to put them under sever check.

“I want to thank you for the success we have recorded even as I tell you that greater challenges lie ahead. We must confront these challenges together and with integrity and commitment to professional and regulatory guidelines.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Finance

CBN Maintains 11.5 Percent Monetary Policy Rate, Leaves Other Ratios Unchanged

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The Central Bank of Nigeria led Monetary Policy Committee (MPC) has left the interest rate unchanged at 11.5 percent to further stimulate activities in the real sector of the economy.

Godwin Emefiele, the Governor of Central Bank of Nigeria disclosed this at the end of the MPC meeting on Tuesday in Abuja.

He said other parameters, the Cash Reserve Ratio (CRR), Liquidity ratio, and asymmetric corridor, were left unchanged.

According to the Governor, the committee voted unanimously to maintain the current monetary policy and attributed the surge in inflation to structural policies, the increase in pump price and the recent #EndSARS protest.

Highlights of CBN-MPC’s  Decision

  • MPR was kept at 11.50%
  • The asymmetric corridor of +100/-700 basis points around the MPR
  • CRR was retained at 27.5%
  • Liquid Ratio was also kept at 30%

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Finance

Unity Bank Grew Gross Earnings by 8 Percent to N34 Billion in Nine Months

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Unity Bank Plc grew gross earnings by 8 percent despite COVID-19 and other headwinds that hurt the profitability of most businesses in the first nine months of the year.

A break down of the bank’s unaudited financial results for the period showed gross earnings rose by 8 percent to N33.91 billion for the nine months ended September 30, 2020, up from N31.26 billion posted in the same period of last year.

The lender’s total assets rose by 44 percent from N293.05 billion in the corresponding period of 2019 to N420.87 billion in the period under review.

Unity Bank grew profit before tax from N1.61 billion in 2019 to N1.71 billion in the period under review, while profit after tax expanded from N1.48 billion in the corresponding period to N1.57 billion in 2020.

Customers’ deposits stood at N332.36 billion during the period under review, up from N257.69 billion posted in 2019.

Commenting on the performance, Mrs. Tomi Somefun, the Managing Director/Chief Executive Officer, Unity Bank Plc, expressed delight at the strong growth recorded across the bank’s balance sheet, especially from both the liability and assets side of the business and across key indices.

She said, “even as the bank continues to innovate in its e-business product bouquet to target and support value chain business with robust technology and thus diversify its earnings base.”

Somefun said, “One of the areas that will define our strategic direction going forward is investment in alternative channels, leveraging further deployment of resources in technology.

“COVID-19 gave us a chance to test the integrity and scalability of our technology, the IT infrastructure, and the electronic banking channels, and provided us an opportunity to see where we needed to improve and strengthen, knowing that the future of sustainable banking business is in alternative channels.”

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Financial Sector Grew by 6.8 Percent in the Third Quarter

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The finance and insurance sector that comprises of both the financial institutions and insurance subsectors grew by 5.91 percent year-on-year in nominal terms in the third quarter (Q3).

According to the National Bureau of Statistics (NBS) latest report, the financial institutions’ subsector accounted for 88.89 percent of the sector in real terms in the quarter under review while the insurance subsector contributed the remaining 11.11 percent.

During the third quarter of 2020, the financial institutions’ subsector grew by 6.8 percent in Q3 2020 from 28.41 percent in Q2 2020 and 0.61 percent in Q3 2019 despite COVID-19 and a tough operating environment. The insurance subsector, however, contracted by -18.67 percent in Q3 2020 from -29.53 percent in Q2 2020 and 3.96 percent in Q3 2019.

On a quarterly basis, the sector declined by 24.76 percent.

In terms of contribution to GDP, the finance and insurance sector contributed 2.46 percent in Q3 2020, higher than the 2.40 percent it represented a year ago and lower than the contribution of 3.76 percent achieved in the previous quarter.

The economy contracted by 3.62 percent in the third quarter following a 6.10 percent decline posted in the second quarter. Nigeria is officially in the second economic recession in four years.

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