Damilola Aina, Temitayo Jaiyeola, Anozie Egole, Justice Okamgba and Oluwakemi Abimbola
A source familiar with the development confirmed the payment
on Thursday.
Meanwhile, unconfirmed sources said three banks received
full payment of debts owed.
The banks are Citi Bank, Stanbic IBTC and Standard Chartered
Bank.
The amount of overdue forward payments is estimated at $6.7
billion, according to the Minister of Finance, Wale Edun.
Meanwhile, the naira has risen to N1,120 against the dollar
as the foreign exchange market reacted to news that the Central Bank of Nigeria
has begun to clear some of its FX backlog on Thursday.
This represents an appreciation of N50 or 4.27 per cent
compared to the N1,170 it traded for on Wednesday. Currency traders, also known
as Bureaux De Change operators, who spoke to The PUNCH stated the naira was
recovering well after making a quick recovery from N1,170/dollar in the morning
to close trading at N1,120/dollar.
The naira in Lagos recorded an average of 1,120/$ on
Thursday, appreciating to 1,040/$ and 1,125/$ in different locations on
Thursday. It traded at 1,170/$ on Wednesday. In Abuja, the average price of the
naira against the dollar was 1,200.
However, the 21 commercial institutions are operating in the
country.
The source said, “Three banks payment received full payment
from the CBN. On the amount, no bank would want to disclose that information.
Statements from two of the banks, obtained by The PUNCH,
confirmed the payment of FX forwards by the CBN.
Stanbic IBTC in a statement said, “Yesterday, the apex bank
began clearing the backlog of outstanding Retail SMIS obligations. The total
amount cleared is yet to be ascertained.”
Also, Citi in a statement issued by its Treasury and Trade
Solutions department, exclaimed, “CBN HAS DONE IT.”
The bank enjoined its customers to begin to speak with their
respective Relationship Manager or Trade Service Professional for clarification
on the matter.
The circular titled ‘Settlement of Matured FX Forwards by
CBN’, said, “We have been directed to inform you that the CBN has delivered all
outstanding matured forward forex.
“We thank you for your patience and cooperation and value
you for your business and partnership. Please speak with your Relationship
Manager or your Trade Service Professional for clarification and additional
details.
“It is a gradual payment that was done secretly, CBN didn’t
make a fuss about it. It started yesterday and continued all through the
night.”
The source added that paid banks represent a small
percentage of outstanding FX forwards with the largest percentage mostly in
tier 1 banks yet to be settled.
He, however, expressed hope that they will be settled in the
next tranche maybe with a lower percentage.
The CEO of a Tier 2 bank who does not want his name
mentioned, also confirmed that his bank received $100m from the CBN, expressing
confidence that the outstanding would soon be settled.
He said, “As I speak with you, our bank has been credited
with $100m by the Central Bank and we are confident of getting the balance
soonest. This is a positive development for the economy and trade in
particular.”
However, there are commercial banks in the system that are
not happy with the CBN because they have yet to receive any credit alert.
Sources at the CBN who spoke to The PUNCH unofficially said,
“The banks who have not received payments are grumbling, alleging that the Apex
bank has denied them of their rights.”
Reacting, the Association of Corporate Treasurers of Nigeria
said the decision to settle matured foreign exchange forwards is a significant
step in promoting stability and confidence in Nigeria’s foreign exchange
market.
The association comprising all corporate treasurers in
Nigeria in a statement obtained by our correspondent said the action
demonstrates the apex bank’s commitment to ensuring the ease of doing business
and reducing uncertainty in the market.
The statement signed by the association president, Adeyinka
Ogunnubi, read, “We, at ACTN, believe that the timely settlement of matured FX
forwards is crucial for our members and the broader business community. It
allows our corporate treasurers to efficiently manage their foreign exchange
risks and plan for their financial obligations.
“We recognize the CBN’s responsiveness to the concerns of
businesses and its continued efforts to implement policies that enhance the
resilience of the Nigerian financial system.
“As an association dedicated to advancing best practices in
corporate treasury management, ACTN will continue to work closely with
regulatory authorities to support policies that foster transparency,
predictability, and stability in Nigeria’s financial markets.”
Also reacting, the Director General of the Nigeria Employers
Consultative Association, Mr Wale Oyerinde, said, the actions of the new
administration of the Central Bank of Nigeria have shown tremendous improvement
in the FX management.
He said, “Well, there is no doubt that the economy lacked
the requisite FOREX to completely close down the outstanding matured FX in
banks. However, the actions of the new administration through the CBN have
shown tremendous improvement in FX management, which was a huge challenge in
the last administration. The current CBN management has stepped up forex
intervention in the FOREX market, which is now accounting for 75 per cent
delivery of the matured FX. While we commend this action and the determination
to clear all the standings, we hope that this effort will be sustained. The
sustainability of this intervention will largely depend on the guarantee of
FOREX inflow from all available sources. With stable, focused and
growth-induced reforms, another opportunity for FOREX like increased FDI will
be enhanced,” Oyerinde added.
Also speaking, the immediate Vice President of the
Manufacturers Association of Nigeria, Lagos Zone, Mr John Aluya, said he is yet
to be informed of any of their members whose backlogs have been cleared.
Aluya, who is also a current member of the National Council
of MAN, noted that if the initiative is properly implemented, it will help to
improve the system. But he said that commercial banks may likely frustrate the
move by the apex bank.
“But if this move is well implemented, it could be an
initiative that could be done in such a way that it will be an improvement in
the system. But I will tell you that for every step the CBN takes the big
elephants in the house are always there to truncate it and if the CBN is not
careful the big elephants will also truncate this move that they are about to
make. The big elephants I mean are the commercial banks. They are the people
who have always made our exchange rate unreliable because they benefit from it.
When you talk of the I&E window you bid for it but manufacturers do not
enjoy the window, because the banks will tell you that you will bid for I&E
at CBN rate, and they will give you another account to pay the difference into
and that is truncating the system.”
The Chairman of the Nigerian Economic Summit Group, Mr. Niyi
Yusuf, said, “This is in the news and it’s useful that the administration is
delivering on its public commitments which should help to improve public
confidence. It’s a good signal and a right step to rebuilding trust and
confidence,” he concluded.
The Chairman of the Nigerian Association of Small and Medium
Enterprises, South-West region Chairman, Solomon Aderoju, queried if the
payments would get to the end users.
He said, “Will it get to the end users? How much have they
cleared? If it will get to the importers and the end users, then, it’s a good
development. If not, then, it’s still the same story. Nigeria’s problem is
multidimensional. Even with the 43 items that they removed, are the importers
now getting the forex from the banks? I am sure they are still using the black
market.
“Over the years, we have been using the foreign reserve. The
reserve has been depleting over the years because we are not adding anything to
export. It’s the only export that can add to the reserve. So, it’s a deficit
account.”
The former Chief Economist of Zenith Bank, Marcel Okeke,
said, “The exact amount is not known. Where did they get the money? What are
the terms of the borrowing? How much have they cleared? The secrecy around the
management of foreign exchange by the CBN is now a concern. You no longer know
the rate at the official window exchange. If they say they are now clearing,
how? The international communities are watching, they are worried, and nobody
is impressed. The government has not done anything to improve government
supply. Even investors are not coming. Aside from these issues, there are other
myriads of problems. The business climate is not encouraging. Are investors
coming because we have the best infrastructure, are they coming because we have
security? What exactly? “
President Bola Tinubu assured Nigerians and investors that
there was an ongoing plan to boost the country’s foreign exchange liquidity.
This was as the Minister of Finance and Coordinating
Minister of the Economy, Wale Edun, said that the country was expecting about
$10bn inflows in the nearest term, which would help to clear foreign exchange
backlog and stabilise the naira.
Speaking at the 29th Nigerian Economic Summit in Abuja
recently, Tinubu acknowledged the challenges faced by the business community in
the financial markets and assured them of additional foreign exchange liquidity
to restore market confidence.
On clearing the FX backlog which has drained investor
confidence, the president said, “All foreign exchange future contracts will be
honoured by this government.”
“I assure you we have a line of sight to the foreign
exchange we need to refloat this economy. And we will get it,” he added.
Naira Gains
The president of the Association of Bureaux De Change
Operators of Nigeria, Aminu Gwadabe, affirmed to The PUNCH that the dollar
closed trading at N1,120/dollar on Thursday. He attributed this to the CBN’s
move to clear some of its backlog.
He said, “It is closing at N1, 120. Even yesterday it came
down to N1,150. Today, it started at N1,170 but it is closing at N1,120. Yes,
this is because of the CBN’s move to clear its backlogs. There is a kind signal
in the market. The CBN should continue to make clarifications.”
In Abuja, the naira exchanged at 1,170/$ on Thursday at the
parallel market, as liquidity challenge persisted, according to some Bureau de
Change Operators.
Some BDC operators who spoke to The PUNCH said this was a
slight improvement from the 1,200/$ traded on Wednesday.
An Abuja-based Bureau de Change said the naira was gradually
improving but had yet to regain its true value.
He said, “The naira is improving but very high compared to
what we were trading before the current administration.”
Another BDC operator who spoke to our correspondent said the
naira traded for N1,115/$.
He further lamented that there was a significant crash in
the parallel market, forcing traders to stop sales of dollars.
He said, “We experienced significant loss today as the
dollar suddenly crashed. Most of us have stopped for now to see what the market
holds. If it reduces tomorrow, we may have to sell at a loss.”
A BDC operator at Wuse Zone 4, Abuja, lamented the huge
crash of the dollar against the naira, noting that the gains recorded by the
Nigerian currency had confused the traders operating in the parallel market.
According to him, the naira gain had put many forex dealers
in crisis and debt.
‘’I bought $20,000 yesterday (Wednesday) and now that the
dollar has crashed, it has put me in a big trouble. I’m confused right now
because I have suffered a huge loss. I need to get someone to buy the dollars
before it crashes further,’’ he said on the phone on Thursday.
Meanwhile, the naira appreciated by 0.76 per cent at the
official market to close at N793.28 to the dollar on Thursday from N799.32/$ on
Wednesday according to details on FMDQ OTC Securities Exchange.
Data from the platform which oversees official foreign
exchange trading in Nigeria revealed that the highest price recorded within the
day’s trading was N1,018.60/$, and the lowest price was N730.00/$.
On Thursday, news broke that the apex bank had begun to
clear some of its foreign exchange backlogs. Sources close to the matter
confirmed that the apex bank had settled some of its FX obligations with
certain banks such as Citibank, Stanbic IBTC, and Standard Chartered, among
others.
Recently, the Federal Government announced it was expecting
$10bn to clear forex backlogs and stabilise the naira. The Minister of Finance
and Coordinating Minister of the Economy, Wale Edun, disclosed this at the 29th
Nigerian Economic Summit.
He said, “In addition, from the supply of foreign exchange
through NNPC, increased production, reduced expenditure, from transactions such
as forward sales, from our discussions with sovereign wealth funds, which are
ready to invest and provide advanced alongside that investment, there is a line
of sight of $10bn worth of foreign exchange in the relatively near future in
weeks rather months.”
JP Morgan’s Report
JP Morgan’s Reaction in a report published on Tuesday said
it expects authorities to maintain some willingness for a somewhat flexible
exchange rate (at least relative to recent years.
However, the large backlog of unmet FX demand and relatively
low net international reserves make it a challenging task. Authorities hope to
secure around US$10bn of new inflows to help ease the FX backlog challenge, but
they should also consider other FX reform measures
JP Morgan disclosed that Nigeria now ranks highest on its
risk-reward scorecard due to elevated carry. It however said, “We remain on the
sidelines waiting for better line of sight on FX inflows and more consistent
liquidity tightening measures Central Bank of Nigeria held its second OMO
auction of the year, pushing short-term rates higher, thus further normalizing
policy.
Expected sources of funding
According to JP Morgan, ”The government is hoping to secure
up to US$10bn in FX inflows over coming months in a bid to clear a substantial
portion of the FX backlog and improve market liquidity. Media reports suggest
this is split between US$7bn from the securitization of future gas dividends to
the government, and US$3bn from the securitization of future oil-related
dividends.
“The ability of the government to raise such amounts via
these channels may be challenging given the US$3bn expected from Afrexim has
been delayed for months, while Nigeria LNG Limited’s historical dividends to
the government have fallen well short of US$2bn annually. It also doesn’t help
that the NNLG Managing Director recently confirmed that the company is
operating at 50% capacity on its Train 1-6 fields and plans to expand its
processing capacity with Train 8 is no longer feasible. That said, the government
appears to be in the final stages of agreeing a US$3.5bn package with the World
Bank (part of which would be direct budget support, while the rest will be
project-linked) with other reports suggesting funding from sovereign wealth
funds in the middle east may be on the cards.” -PUNCH