The new forex policy of the Central Bank of Nigeria (CBN) is seen to bring some respite to deposit money bank which have suffered losses as a result of the foreign exchange crises.
The CBN on February 20,2017,announced a new foreign exchange policy to enhance liquidity, close the gap between the official inter-bank and parallel market rates, as well as to ease the difficulties Nigerians encounter in funding foreign exchange transactions.
Fitch Ratings said measures announced on 20 February by the CBN may ease some of the severe foreign currency liquidity pressure faced by the banks.
An analysis of the effect of forex on banking sector by KPMG show that Access Bank Plc recorded net foreign exchange loss income of N56.1 billion in 2016. This represented 342 percent compared to N23.2 billion in 2015.
Kabir Okunlola, partner, audit services, KPMG Professional Services, noted that the scarcity of dollar slow down the volume of business of banks’ customers as they transacted according to the extent of foreign exchange available to them.
“with improve foreign exchange supply, banks will do more business and everybody will benefit in a way”, Okunlola told BusinessDay.
In Fitch rating’s view, The most important aspect of the CBN’s announcement is a plan to normalized the Foreign exchange interbank market.
The intention is to clear the backlog of overdue foreign currency obligations owed by banks to international creditors. These are primarily trade finance obligations owed to correspondent banks. In addition, the CBN will no longer have a say in how banks on-lend the foreign currency they access from it. Banks previously had to demonstrate that funds were being directed to priority sectors of the economy. The CBN says that providing foreign currency to the manufacturing sector is still a priority, but with restrictions eased, larger banks with greater access to foreign currency will be free to lend to the smaller banks whose access to international funding is restricted. The CBN has also stated its intention to increase intervention in the FX interbank market to increase supply. The CBN has also reduced the maximum waiting times for banks to take delivery of foreign currency through its forward sales contracts to 60 days from 180. The first of these forwards was announced yesterday for USD500m, with banks reported to have bought around USD371m in one-month and two-month forwards.
This should help banks make more timely payments to creditors, speeding up the flow of currency to importers and helping the economy. The CBN’s initiatives are an important boost for banks as access to foreign currency liquidity is tight and banks have struggled to meet their foreign currency obligations, Fitch said.
HOPE MOSES-ASHIKE
