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Gwadabe: CBN Must Deepen Forex Market

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  • Gwadabe: CBN Must Deepen Forex Market

The President of the Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, in this interview urges the Central Bank of Nigeria to create more sources of foreign exchange for operators in the market. Obinna Chima presents the excerpts:

Is there need for the CBN to continue to sell dollars to BDCs?

You see the sovereignty of any currency is the sovereignty of that nation. No nation will just fold its arm and allow others dictate the exchange rate of its currency. Every nation protects their currency. Now having said that, one of the determining factor of this currency stability is the buffer or the external reserve. And I want to congratulate the CBN. The buffers have been good and there is projection of $45 billion reserve by the end of next year. So that will continue to generate positive outlook for the exchange rate. And I am happy that the CBN Governorrecently said the central bank has the ammunition to fight anybody that will joke with its exchange rate regime. So, the sustainability of CBN intervention in ensuring continues growth, continuous stabilisation of the exchange rate is just too important.

Now, for the BDCs, for the past one year, we have not been relying on the CBN sources. Our sources have been diversified from the CBN sources to IMTO sources. So, all that the CBN needs to do is to see, in conjunction with the association how we can deepen the market. It is all about deepening the forex market. We can come in with other products or other sources of supply.

Even the Investors’ and Exporters’ (I&E) window, as far as I am concerned should be another window for the BDCs to be buying dollars. The CBN, like what they are doing right now, coordinating the IMTO proceeds; they should also begin to coordinate the proceeds of I&E window so that we have enough of liquidity for the BDCs to ensure the stability is maintained. Even the Diaspora remittances, you see the association is working on a lot of automation projects to enhance standards, to enhance competition, global competitiveness, in terms of our visibility even for the world to see that there is honesty and transparency in our system. So, we are building confidence and we are working with the Nigeria Interbank Settlement System (NIBSS) to ensure that most of our operations, most of our systems are being transparent and very soon our members will start doing online real-time rendition of their returns. We have perfected that with the CBN, we are only waiting for the tokens to be provided. So our members will not need to go to CBN branches to submit their returns, they will now be doing it from the comfort of their office. So, it is germane for the CBN to continue to deepen the forex market. Statistics and experience have shown that the only reliable and efficient tool to achieving this convergence is the BDC sub-sector.

Why are your members agitating forincreased margin and are thereother challenges your members are facing?

Right now, the BDCs are operating under what I call the challenge of multiple exchange rates. That has been a very key issue in terms of also continued transparency and stability of the forex market. However I am also not unaware of the fact that the sovereignty of the currency is the sovereignty of that nation. So, the CBN is having two or three different exchange rates to ensure liquidity. But you see that has been posing a challenge because even the bank rateis at N358 per dollar and we are buying N360 per dollar from the CBN. So, it is a very big challenge for our members to operate. So that has been making the business very unprofitable. It is very unprofitable to the extent that some members are not able to meet up with their overhead cost, salaries. Each BDC has about six staff and another challenge is the bank charges. What the banks are charging on BDC transactions is usually high, and these are some of the potent challenges we are facing.

The CBN should allow a level-playing field and competitive rates among the various operators in the forex market. A situation where banks are buying dollars from CBN at N358 per dollar and sell the same dollars to BDCs at N360 does not represents a level-playing field or fair competition given the fact that we operate in the same market segment.

But we have hope because you will see the CBN also review the exchange rate rules. I am sure they are working now on inflation, once they can achieve single digit inflation, then they will begin also to ensure that the exchange rate is headed south-wards to ensure growth, increased output and more employment.

That is because up till now, despite the fact that inflation has dropped to15.9 per cent, it is still higher than the MPC rate. Remember that the MPC rate is 14 per cent, and we are talking about inflation rate about 16 percent. So by next year, with projections and a lot of revenue coming in, from increased oil prices, from recovery of assets, I am sure we will have a lot of buffers to ensure that the major sectors are working perfectly. More especially the manufacturing sector. So, we expect a positive outlook by next year.

But do you think it is possible not to have multiple exchange rates?

It is very possible. When you look at determination of the exchange rate now, we have what we call managed float. And if you look at even where the exchange rate should go, if not the inflation rate that is higher than the MPC rate, am sure by now, the prediction of dollar should be N250 per dollar. It is feasible.

What is your outlook for the naira in 2018?

My outlook for the naira is that I see the naira going to about N300 to the dollar. The basis for my outlook is that we are going to have robust external reserves next year; we have cut down our food import and we are diversifying our exports. You will alsosee that in all we are doing now, everybody is imbibing the rules of corporate governance, Know Your Customers (KYC), Anti-money laundering rules, among others.

The third quarter GDP report showed that except for the oil and gas and agric sectors, all other sectors contracted. This prompted some analysts to argue that the economy is still in recession. From the BDC industry perspective, what is yourtake on this?

I think economics have already provided the answer to the issue of recession. We cannot start redefining what a recession is. Recession as defined by economists is two consecutive quarters of negative growth, and if there are statistics that indicates otherwise that we had positive GDP growth then I also want to agree with that statistic. However, I agree that it’s like a single sector driven positive GDP growth, where it is only the oil and gas sector that is contributing most of the growth we are having. But I think it is not a bad analysis, it is also something that can keep us in our comfort zone, that we are doing well. However, in terms of the BDC sub-sector contribution, we have contributed billions of naira in turnovers. Because each BDC is doing a minimum of N15 million transactions per week, multiply that by 3,500 BDCs.

So, this is the turnover we contribute to the economy. In fact, I don’t think the oil sector has the kind of turnover we are having. And with our automation drive, we believe inflow from investors as a result of the confidence so far established on the stability of the exchange rate, will double or tripple. And with the continued determination of the government to ensure peace, the diaspora remittances and estimated at $35 billion, we also predict, will go up to between $45- $50 billion. So, these are other sources that will empower the CBN with more ammunition to use the BDCs and ensure that the exchange rate continues to stabilise, and the rates continue to converge, and the spikes is no more in the market.

You said that the CBN should allow BDCs access dollars from the I&E window. How workable is this?

Yes, it is very workable. If you look at the IMTO window now, the proceeds come to the banks, which is been coordinated by the CBN, and it is disbursed to BDCs operators. So, the same concept or procedure can be adopted in I&E window. In fact what we are even looking at is that there should be a Diaspora window like I&E window. The modalities, the technicalities are the same. It is the same institutions that will be involved. So, it is the same players, it’s just coordinating them and make sure the same thing is applied and everybody is happy.

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

The Africa Digital Inclusion Facility Approves $1.3m Grants for Two Research to Enhance Women’s Digital Access to Loans and Micro-insurance

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The Africa Digital Inclusion Facility approves grants worth $1.3 million for two research efforts to enhance women’s digital access to loans and micro-insurance.

The African Development Bank has approved two grants for research that will increase African women’s access to a range of digital financial services including loans and micro-insurance.

The grants, for $1 million and $300,000 respectively, will be disbursed through the Africa Digital Financial Inclusion Facility, a blended finance vehicle supported by the Bank, to two financial technology firms, Pula Advisors Kenya Ltd., and M-KOPA Kenya Ltd.

Pula Advisors will use the $1 million for research of social, cultural and economic factors that impact women farmers’ access to micro-insurance in Kenya, Nigeria and Zambia. Research findings will inform the design and implementation of gender-centric insurance products. The project will be undertaken over a 3-year time frame.

“This grant funding will be used to leverage technology to develop innovative and responsive loan and insurance products that can spur productivity and inclusion, especially for our women smallholder farmers and traders.” said Sheila Okiro, the Bank’s Coordinator for ADFI.

The three-year project will have three phases: product development; piloting; and scaling; the outcomes are expected to benefit 360,000 farmers, 50% of them women, as well as boost farm yields by up to 30%. This will also raise incomes and enhance household and national food security.

M-KOPA will use the $300,000 grant funding for research involving 250 women and 250 men in Kenya’s Kisumu, Eldoret and Machakos counties. The company will assess the barriers to and opportunities for women’s access to digital financial services and financial literacy programmes via smartphone, and use the research insights to design a financial services app that is relevant to small-scale women traders.

The project, approved by the Bank on 9 February, 2021, will benefit women with no or limited access to financial services that run small informal businesses. Once developed, the mobile app will be used to pilot small loans to the women traders.

Both projects align with ADFI’s digital products and innovation and capacity building intervention pillars as well as its cross-cutting focus on gender inclusion, a thematic running across all its interventions.

The PULA grant approval meets African Development Bank strategic goals, including the Ten-Year Strategy, two High-5 priority areas—feed Africa and improve the quality of life for Africans— and the financial inclusion strategies of Kenya, Nigeria and Zambia.

The M-KOPA project is aligned with the Bank’s Affirmative Finance Action for Women in Africa (AFAWA) program that seeks to increase access to finance for women.

ADFI is a pan-African initiative designed to accelerate digital financial inclusion throughout Africa, with the goal of ensuring that 332 million more Africans, 60% of them women, gain access to the formal economy. The Facility was formally launched in June 2019 at the Bank’s Annual Meetings in Malabo, Equatorial Guinea. Current ADFI partners are the French Development Agency (AFD); the French Treasury’s Ministry of Economy and Finance; The Government of Luxembourg’s Ministry of Finance; the Bill and Melinda Gates Foundation; and the African Development Bank, which also hosts the fund.

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Banking Sector

FirstBank Boosts Cross Border Payment With FirstGlobal Transfer

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FirstBank Boosts Cross Border Payment With FirstGlobal Transfer

First Bank of Nigeria Limited has announced the launch of First Global Transfer (FGT) to promote the international transfer of funds across its subsidiaries in sub-Saharan Africa.

The bank, in a statement, said: “First Global Transfer (FGT) initiative is specifically designed to ensure safe, timely and improved efficiency in the transfer of funds across the network of FirstBank subsidiaries in Africa.

“The FGT is not restricted to FirstBank and FBNBank customers alone but it is also open to every individual resident in the country the funds’ transfer is originating from.

“Intending users of the initiative are to visit any of the bank’s branches in Nigeria or subsidiaries in Africa, which are: FBNBank DRC, FBNBank Ghana, FBNBank Gambia, FBNBank Guinea, FBNBank Sierra-Leone, or FBNBank Senegal to enjoy the service.

“For example, with First Global Transfer, individuals and customers in Sierra-Leone can walk into any FBNBank branch to send money to FirstBank customers in Nigeria as well as FBNBank customers in Gambia, Ghana, DR Congo, Senegal or Guinea.”

Speaking on the initiative, Dr. Adesola Adeduntan, Chief Executive Officer, FirstBank said, “today’s customer is influenced by the technological advancement shaping businesses across various industries and our First Global Transfer (FGT) initiative is one of those advancement created to impact every individual in our host community in Africa, whilst promoting the ease and swift transfer of money from one country to another for business or personal activities.”

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Finance

Ecobank To Pay Customers N5 For Every Dollar Received

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Ecobank To Pay Customers N5 For Every Dollar Received

Ecobank has implemented the CBN scheme which offers N5 for every Dollar received into domiciliary accounts or as cash over the counter. Korede Demola-Adeniyi; Head, of Consumer Banking, Ecobank Nigeria, who announced this in Lagos stated that the decision is in line with the CBN directive and fully aligns with efforts to encourage the inflow of diaspora remittances into the country.

She noted that the “CBN Naira 4 dollar scheme” is an unprecedented incentive for senders and recipients of international money transfers.

Korede Demola-Adeniyi said that the scheme takes effect from 8th March and will run till 8th May 2021. “Ecobank will pay N5 on every Dollar so beneficiaries will not only get the foreign currency sent from their family and friends abroad, but they will also get extra Naira”, she stated.

Only recently, Ecobank had a first-of-its-kind virtual Diaspora Summit to discuss opportunities for Nigerians living abroad and the various platforms available to assist them with their investment decisions and remittance needs. The event had major players in the remittance space, diaspora audience, government officials and notable stakeholders in attendance.

Further, the Managing Director, Ecobank Nigeria, Patrick Akinwuntan has disclosed that apart from consistent engagement with Nigerians in the diaspora, Ecobank is leveraging its digital technology to make remittances to Nigeria and Africa easy, convenient and affordable.

Mr. Akinwuntan stated that growing evidence has shown a positive relationship between diaspora remittances and economic growth.

“Ecobank will continue to pursue its mandate of helping to enhance the economic development and integration of Africa, through the 33 countries where the bank operates on the continent. Ecobank’s Rapidtransfer and mobile app (Ecobank Mobile) enable Africans, wherever they are, to easily and instantly send money to bank accounts, mobile wallets and agent locations across 33 African countries”, he stated.

Ecobank Nigeria, a member of the Pan African Banking Group is committed to supporting Africans in the diaspora by providing advisory services, remittance solutions, investment options and financial planning schemes. The bank also offers mortgages, treasury bills, capital market instruments, among others.

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