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CBN Increases Forex Allocation to Banks To Meet Customers Request

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Godwin Emefiele CBN - Investors King

The Central Bank of Nigeria (CBN) yesterday announced the increase of foreign exchange (forex) allocations to banks to meet the requests of customers, particularly travellers, seeking forex for travel allowances, payment of tuition and medical fees, among other Invisibles.

The moves followed the warning by the CBN Governor, Mr. Godwin Emefiele, at a weekend meeting with managing directors of Deposit Money Banks (DMBs), cautioning them to desist from denying customers, particularly travellers, the opportunity to purchase forex for Personal Travel Allowance (PTA), Basic Travel Allowance (BTA), tuition fees, and medical payments as well as Small and Medium Enterprises (SMEs) transactions or for the repatriation of Foreign Direct Investment (FDI) proceeds.

Confirming the discussions at the meeting of bank chiefs, the Acting Director, Corporate Communications Department at the CBN, Mr. Osita Nwanisobi, said in a note that the CBN remained committed to ensuring liquidity in the forex market to meet genuine and legitimate demands of customers.

He added: “The CBN agreed to increase the amount allocated to banks for travellers, Small and Medium Enterprises among others. The banks also agreed to operate something akin to foreign exchange imprest account such that the coffers of banks will be replenished so long as they retire the initial amounts to the satisfaction of the CBN.”

Nwanisobi allayed fears of a forex shortage and urged members of the public seeking to purchase foreign exchange for PTA, BTA, payment of tuition fees or medical fees to do so from their banks.

“We wish to assure members of the public that the CBN shall continue to monitor market developments and is committed to ensuring an efficient FX market for all legitimate users,” he said.

He, however, advised customers to approach their customer service representatives of their designated banks should they encounter challenges, adding that they could escalate complaints to the CBN via the bank’s toll-free line: 07002255226 or send an email to cpd@cbn.gov.ng if their requests are not met.

Sources at the meeting with the bank CEOs held to address the challenge faced by customers in accessing forex from their banks said Emefiele warned that the CBN would deal with any bank that denies customers the opportunity to purchase foreign exchange for legitimate purposes.

According to the source, Emefiele said the CBN management frowned upon the seeming difficulty customers experienced in accessing foreign exchange through the banks, particularly for Invisibles such as PTA and requests bordering on tuition and healthcare needs.

Emefiele had last week reiterated the bank’s commitment to ensuring steady availability of foreign exchange for manufacturers.

Emefiele had also urged banks as well as Nigerians to strive to end environmental pollution and ensure the sustenance of banking principles.

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Naira

Naira Hits Five-Month Low Amid Dollar Demand Surge

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Naira to Dollar Exchange- Investors King Rate - Investors King

Nigeria’s naira extended its losing streak to a fifth consecutive day as it slipped to its weakest level since March despite the Central Bank of Nigeria’s (CBN) interventions.

The naira closed at 1,577.29 per dollar on Monday, down from Friday’s N1,563.8 per dollar on FMDQ.

This decline comes despite the CBN’s efforts to stabilize the currency by injecting $122.7 million through dollar sales into the market.

However, analysts argue that these amounts were insufficient to balance the robust domestic demand for the greenback.

“The CBN has been in the market selling $50 million from time to time, which is not enough,” commented Carlo Morelli, senior portfolio manager at Azimut Investment SA.

Morelli attributes the persistent pressure on the naira to capital outflows and a lack of investor confidence in the currency, despite the central bank’s commendable efforts in tightening monetary policy and reducing naira liquidity.

Central Bank Governor Olayemi Cardoso has aggressively raised interest rates in an attempt to curb inflation and stabilize the naira.

The benchmark borrowing rate now stands at 26.25%, following an increase of 14.75 percentage points since May 2022.

However, the currency has weakened by approximately 70% against the dollar since exchange-rate controls were eased last year.

“Restoring foreign exchange broad confidence is the last step, and the huge volatility in May delayed the return to normalcy,” Morelli added.

“Many foreign investors are still waiting for more evidence of stability before considering Nigeria investable.”

The naira’s decline makes it the second-worst performing currency tracked by Bloomberg in 2024, trailing only the Lebanese pound.

The recent depreciation has been fueled by both seasonal dollar demand and ongoing investor skepticism.

The central bank’s next policy decision, set for July 23, is expected to address these issues. Monday’s data showing annual inflation quickened to 34.2% in June suggests that another rate hike might be on the horizon.

In a bid to bolster the naira, the central bank has increased Nigeria’s foreign exchange reserves to $35 billion as of July 8, the highest level since May 30, 2023.

This boost is attributed to recent loans from the World Bank and the African Export-Import Bank.

Omobola Adu, an analyst at BancTrust & Co. Investment Bank, noted that recent pressure on the naira has also stemmed from corporates and individuals preparing for foreign vacations.

“Boosting the supply of FX into the country remains crucial for the government to alleviate pressure on the naira,” Adu stated.

He suggested that a eurobond or local dollar bond sale later this year, along with increased support from multilateral institutions, could help shore up reserves.

Despite these challenges, Central Bank Governor Cardoso remains optimistic, asserting that the worst of the currency’s volatility is over.

He reiterated this sentiment on Thursday in Lagos, addressing business leaders and highlighting improvements in crude output and capital inflows as positive signs.

Nigeria, Africa’s largest crude producer, relies heavily on oil sales, which account for at least 80% of its export earnings.

The country’s combined crude oil and condensate output rose to 1.5 million barrels per day in June, the highest since February, according to the upstream petroleum regulatory commission.

“While the naira may be undervalued, for the naira to stabilize and perhaps regain ground, large portfolio and capital inflows are needed,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc in London.

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Forex

Zimbabwe Urged to End Dollar Dependence, Boost Local Currency

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U.S dollar - Investors King

Zimbabwe must take decisive steps to reduce its reliance on the US dollar and promote the use of its own currency, according to Information Secretary Nick Mangwana.

In an opinion piece published in the Herald newspaper, Mangwana outlined the urgent need for de-dollarization to achieve economic sovereignty, stability, and growth.

“The benefits of de-dollarization far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar grip,” Mangwana asserted.

His call comes as more than 80% of the nation’s transactions are currently denominated in dollars, a situation exacerbated by the lifting of a ban on the US currency at the start of the coronavirus pandemic in March 2020.

This move was initially intended to ease an acute shortage of foreign exchange.

Mangwana said reducing reliance on the greenback is a critical step toward regaining economic control.

“De-dollarization will help promote our local currency and diversify the country’s reserves,” he said.

By encouraging the use of the Zimbabwean dollar, the country can work towards stabilizing its economy and fostering sustainable growth.

The push for de-dollarization is part of a broader economic strategy. Last week, President Emmerson Mnangagwa hinted that Zimbabwe’s bullion-backed Zimbabwean dollar (ZiG), its sixth attempt in 15 years to establish a stable currency, may become the sole legal tender before 2030.

This move is seen as a long-term solution to the ongoing currency instability.

Mangwana’s advocacy for de-dollarization reflects a growing consensus among government officials that economic independence is vital for Zimbabwe’s future.

“Reducing our dependence on the US dollar will not be without challenges, but the long-term benefits are undeniable,” he said.

The transition to a more self-reliant economic model is expected to involve significant policy changes and strategic planning to ensure a smooth and effective implementation.

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Forex

Nigeria’s Foreign Reserves Rebound to $35.05bn Under Tinubu Administration

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Forex Weekly Outlook March 6 - 10

Nigeria’s foreign reserves climbed to $35.05 billion as of Monday, according to the latest data from the Central Bank of Nigeria (CBN).

This represents a significant recovery to levels not seen since the early days of President Bola Tinubu’s administration.

The current reserve level represents a return to the $35 billion mark last recorded on June 2, 2023, when it stood at $35.02 billion. A day after President Tinubu’s inauguration, the reserves were reported at $35.09 billion.

Since then, Nigeria’s foreign reserves have fluctuated, frequently falling below the $35 billion threshold.

The reserves dipped to a low of $32.11 billion on April 19, prompting speculation about the CBN’s intervention in the currency market to support the naira.

The naira, which was officially floated on June 14, has lost approximately 70 percent of its value against the US dollar since the market segments were harmonized.

Despite these challenges, the recent rise in reserves indicates a positive trend. In response to concerns about market intervention, CBN Governor Dr. Olayemi Cardoso said the apex bank is committed to a market-driven approach.

“We encourage a willing buyer, willing seller dynamic and aim for minimal central bank intervention, except in very unusual circumstances,” he said during the last IMF Spring meeting.

The Monetary Policy Committee (MPC) of the CBN has also highlighted the importance of improving liquidity in the foreign exchange market.

Personal statements from the committee’s 295th meeting in May, recently published on the CBN’s website, reflect a focus on maintaining a vibrant currency market.

The MPC raised the Monetary Policy Rate (MPR) to 26.25 percent while retaining other policy parameters.

Since the April low, Nigeria’s foreign reserves have appreciated by $2.98 billion, showcasing a significant recovery amidst ongoing economic reforms.

This rebound provides a measure of optimism for the nation’s economic stability, particularly as it grapples with the broader impacts of currency devaluation and inflation.

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