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  • Forex: Monthly demand rose from N12bn to N588b in 2 years – CBN

    The Central Bank of Nigeria, CBN has said despite the drop in forex earning by the Federal Government, the demand for it (forex) has continued to rise.

    The CBN Governor, Godwin Emefiele said on Tuesday that the average monthly import bill rose from N12.4 billion in 2005 to N588.1 billion in the first five months of 2017.

    Speaking in Lagos at the 2017 Annual General Meeting of the Nigerian Bar Association (NBA), Emefiele said the import bill rose despite the significant reduction in inflow of dollars, caused by the sharp drop in oil prices.

    He said the CBN witnessed a significant decline in forex inflow and reserves from about $42.8 billion in January 2014 to about $23.7 billion in October 2016 before recovering to slightly over $30 billion today.

    Acccording to him, in terms of inflow, the bank’s forex earnings fell from as high as $3.2 billion monthly sometime in 2013 to as low as $580 million per month at some point.

    Although Emefiele did not give reasons for the rise in the import bill, it may not be unconnected with Nigerians’ love for imported goods or increased production in the manufacturing sector.

    “Despite these outcomes, the demand for forex has risen significantly. For example, in 2005 when we had oil prices at about $50 per barrel for an extended period of time, our monthly average import bill was N12.4 billion. In stark contrast, the average import bill in the first five months of 2017 is about N588.1 billion per month,” he said.

    He said the combined effects of the aforementioned exogenous shocks, especially the fall in oil prices and the capital flow reversals due to monetary policy normalisation in the United States, compelled several depreciations of the Dollar-Naira Exchange Rate.

    He said the negative effect of high inflation and exchange rate volatility have prompted the CBN to tackle both developments head-on.

    He noted that high inflation hinders economic growth and is not only harmful to growth in the long run, it discourages saving and inhibits planning and investment as people become more skeptical on the direction of prices of goods and services.

    Emefiele, who spoke on the theme: “The dilemma of monetary policy during a recession: Potential Options for Nigeria”, said achieving low inflation is a major priority of the CBN, adding that any decision it takes on the economy usually has certain repercussions.

    He said the naira depreciated from $1/N155 in June 2014 to as high as over $1/N500 in the parallel market around February 2017 adding that the country is also dealing with the perennial problem of high interest rates in Nigeria. The naira exchange rate against the dollar has however improved after the CBN introduced the Investors & Exporters forex window.

    “If we had chosen to reduce interest rates and increase money supply, we would have further deepened the recession, while assuring foreign investment outflows which would worsen foreign exchange reserves accretion,” he said.

    He said faced with the need to tackle high inflation, the correct monetary policy would be to tighten money supply either by increasing the Cash Reserve Requirement (CRR) of banks, mopping up money through increased Open Market Operations, or raising the Liquidity Ratio of Banks.

    However, while doing any or a combination of these would help moderate inflationary pressure, it could ensure that interest rates remain high and may even be inimical to restoring economic growth in the short term.

    However, if the CBN were to abandon its pursuit of low inflation and decide to implement expansionary Monetary Policy to engender rapid economic growth, the outcome for inflation would be much worse. He said expansionary monetary policy would require reducing the CRR and Liquidity Ratios and increasing money supply through purchase of Bonds and Treasury Bills.

    The CBN has maintained a tight monetary policy to contain rising inflation and encourage forex inflow into the country.

    “Although we made some progress from these initial policies, the pressure on the forex markets continued to swell. With the rate at N197/$1 and the premium vis-a-vis the unstructured markets widening, there were indications that autonomous forex suppliers were hesitant as they perceived the pricing to be inappropriate,” the CBN boss said.

    He said the introduction of a more flexible exchange rate regime with a view to eliminating forex market pressure, buoy autonomous forex inflows, and preserve the forex reserves. Also, to support small-scale users and encourage increased forex inflow from diaspora remittances, the Bank undertook the licensing of International Money Transfer Organisations (IMTOs).

    “More importantly, however, in order to further extricate the lingering bottlenecks, increase transparency and boost supply in the forex market, the CBN, in April 2017 introduced the special Investors’ and Exporters’ (I&E) FX Window. The establishment of that special (I&E) window has tremendously facilitated market driven transactions and has catered for the FX needs of investors and exporters. As a result, we have seen an appreciably improved FX supply due to the introduction of the window,” Emefiele said, adding that $4.7 billion of foreign exchange inflow had been recorded through this window since April 2017.

    He said he was unaware of the seeming unpopularity of some decisions taken by the CBN.

    Developments in the international oil market exposed the fundamental vulnerabilities of oil exporting countries, such as Nigeria, as commodity exporting countries generally endured unfavorable conditions.

    “We saw the average price of crude oil fall by nearly 60 percent from $114 per barrel in June 2014 to $28 per barrel in February 2016, before recovering to about $50 per barrel today. These resulted in a dwindling of our overall economic fortunes, as net inflows tapered and pressures escalated in critical financial markets,” he said.

    He said available data indicated that Nigeria’s Gross Domestic Product (GDP) contracted by 1.6 per cent in 2016 compared with a growth of 6.2 per cent in 2014, and 2.8 per cent in 2015. Also, within this period, the economy, he said, witnessed sharp increases in inflation rate, reflecting supply constraints, exchange rate depreciation, and adjustments to energy prices.

    Emefiele said inflation rate rose persistently from 9.2 per cent in July 2014 to 18.7 per cent in January 2017.

     

  • Peg real sector loan interest rate at 3% to encourage investors, Don tells CBN

    A don, Dr Anthony Kifordu, has urged the Central Bank of Nigeria (CBN) to ensure that three per cent interest is charged for loans given to the real sector of the nation’s economy.

    Kifordu, who lectures at the Edo University Iyamho (EUI), told the News Agency of Nigeria (NAN) in a telephone interview on Tuesday that the lowering of the interest rate would fast-track the country’s infrastructure upgrade.

    He said: “The real sector cannot be vibrant if it does not borrow at single digit interest rate.

    “Three per cent interest rate on loans to the real sector is just ideal for the sector to be vibrant.’’

    The don, a business administration expert, also said that double digit interest on loans would not enable any form of business to thrive in Nigeria.

    “Everything economically good for Nigeria is tied to adequate, functional and modern infrastructure in place.

    “Physical infrastructure improvements that Nigerians hope for, will not be a concrete one if the real sector has to pay double digit interest on their loans.

    “The current inflation and interest rate on loan in Nigeria also stand as disincentives to business investment development and infrastructure growth of the country,’’ he said.

    NAN reports that pundits have pegged Nigeria’s inflation rate at 16.10 per cent as at June.

    The CBN noted that the benchmark interest rate to all sectors, including the real sector was at a steady 14 per cent as at end of July, 2017.

    Kifordu also urged the CBN to take tough measures on the“ unwholesome practices” associated with the naira-dollar exchange to stimulate business productivity.

    “The `round tripping’ that cause our naira to diminish in value needs to be tackled because that will provide a succour to local entrepreneurs and small businesses.

    “Businesses in Nigeria will not grow in bounds and leap if our naira is not given priority in terms of value and major currency for business,’’ he said.

    The don noted that there were growing concerns over the falling of the naira as against the dollar.

    “Nigeria’s economy shows sign of sickness by a very weak naira.’’

     

     

    NAN

  • Forex: Again, CBN injects $195m intervention as Naira exchanges for N362/$1

    Forex: Again, CBN injects $195m intervention as Naira exchanges for N362/$1

    The Central Bank of Nigeria (CBN) on Monday injected another 195 million dollars into the Foreign Exchange (Forex) market.

    Mr Isaac Okorafor, Acting Director in charge of Corporate Communications, CBN, said this in a statement in Abuja.

    Okorafor reiterated that the intervention was in line with the CBN’s commitment to sustain liquidity in the market to meet genuine request as well as deepen flexibility in the forex market.

    He said 100 million dollars was offered in wholesale auction at the interbank market while the Small and Medium Enterprises (SMEs) and invisible segments were offered 50 milion and 45 million dollars respectively.

    The development followed a major intervention on July 28 by the CBN.

    About 100 million dollars was offered for whole sale intervention, 50 million dollars for SMEs while 45 million dollars was for invisibles.

    Okorafor said the leadership of the bank expressed delight at the positive impact it’s current forex management was having on the manufacturing sector, agriculture and economic activities across the country.

    He said,” the CBN would continue working on achieving the objective of convergence between the exchange rates at the Nigeria Autonomous Foreign Exchange (NAFEX) and the Bureau-de-Change segments of the market.

    He assured of proper surveillance of the forex market by the apex bank to guarantee transparency in the sale of foreign exchange.

    He also advised those who genuinely required foreign exchange for their transactions to approach their banks as they (banks) had enough forex to meet the demand within the stipulated time by the CBN.

    Meanwhile, the naira hovered at between N360 and N362 to the dollar in the BDC segment of the market on Monday.

     

     

    NAN

     

  • Why we retained lending rate at 14% bench mark – CBN

    The Governor of the Central Bank of Nigeria, CBN, Godwin Emefiele, on Tuesday said the benchmark lending rate for banks in the country was retained for the seventh consecutive time at 14 per cent to maintain the modest stability in the foreign exchange market.

    The CBN governor told journalists at the end of the 114th meeting of the Monetary Policy Committee, MPC, on Tuesday that majority of the members resolved to retain the monetary policy rate, MPR, which is the controlling lending rate to banks, at 14 per cent.

    Although he acknowledged that Nigeria’s economy was on the path of moderate recovery, he said the committee also decided to leave the cash reserve ratio, CRR at 22.5 per cent; liquidity ratio at 30 per cent, and asymmetric corridor at +200 and -500 basis points around the MPR.

    He said the decision to leave the interest rates unchanged was informed by the need to continue to attract foreign investment inflow to support the foreign exchange market, and to promote economic activity.

    Although the CBN governor said low-interest rate was necessary, to make it easy for businesses to borrow at low-interest rates and for easy injection of liquidity into the financial system, the MPC resolved to keep the rate at 14 per cent, to help reverse the inflationary trend in the economy.

    He recalled that inflation was at about 18.8 per cent when the CBN decided to freeze lending rate at 14 per cent, pointing out that even with inflation at 16 per cent as at June, it was still considered very high.

    Based on studies conducted, and modules developed for computing inflation threshold, Mr. Emefiele said Nigeria’s inflation threshold ranged between an average of 10 and 12 per cent.

    “Any inflation rate above the upper limit of 12 per cent would create a negative impact of retarding, rather than stimulating growth, no matter the action taken,” he said.

    “The CBN was interested in how to reverse the inflationary trend. We are happy we have done so, by bringing the rate from 18.8 per cent to 16.1 per cent. We are hopeful that it will continue to trend down wards.

    “We are not there yet. But, CBN believes easing the interest rate now will pull the real interest rate further to a negative territory, which is a disincentive to investment. This will hurt the stability we have suffered to achieve in the foreign exchange market and a need to ensure that that does not happen,” Mr. Emefiele said.

    The governor said the committee expressed concerns about the rising fiscal deficit currently at about N2.51 trillion in the first half of 2017 and the pressure on high government borrowing.

    Urging fiscal restraint to check the growing deficit, the CBN governor said the MPC supported government’s proposed issuance of sovereign-backed promissory notes of about N3.4 trillion for the settlement of accumulated local debt and contractors’ arrears.

    The Committee, however, urged caution in monitoring the release of the promissory notes to avoid excessive injection of liquidity into the system, which is capable of removing the gains so far achieved in inflation and exchange rate stability.

     

  • BREAKING: CBN leaves monetary policy rate at 14%

    The Monetary Policy Committee of the Central Bank of Nigeria on Tuesday left the Monetary Policy Rate unchanged at 14 per cent.

    The CBN Governor, Mr Godwin Emefiele who announced the decision of the committee at the end of a two-day meeting held at the apex bank’s headquarters in Abuja explained that the six members of the committee agreed to maintain the current monetary policy stance.

    He, however, said that two members voted to ease monetary policy rate.

    He said apart from the MPR which was retained at 14 per cent, the committee also retained the Cash Reserves Ratio at 22.5 per cent.

    Also retained are the Liquidity Ratio which was left at 30 per cent; and the Asymmetric Window which was left at +200 and -500 basis points around the MPR.

    Details later…

  • CBN returns N51.9bn illegal deductions to bank customers

    The Central Bank of Nigeria has said that it has recovered over N51.9bn illegally deducted by commercial banks and returned it to the customers.

    The CBN stated that the amount was illegally removed from the accounts of bank customers across the country in the past five years.

    The Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, disclosed this in Port Harcourt during an interactive session with stakeholders, including labour union leaders, in the South-South zone.

    Okoroafor stated that the recovery and return of the funds to customers became necessary after series of complaints on illegal deductions from their accounts by commercial bank customers got to the apex bank.

    Putting the exact amount recovered and returned by the CBN Consumer Protection Department at N51,913,350,828.85, he explained that $18,191,444.19, €26.286,62 and £6,000 were also recovered within the period.

    Okorafor, who was represented by an assistant director in the apex bank, John Attah, recalled that the CBN received 10,548 complaints, adding that the amounts recovered were from 5,746 resolved cases.

    He stated, “When such complaints are received, the CBN will embark on a thorough investigation of what happened and how the deductions were made. If we discover that the bank was wrong, we will write and order the bank to return the money to the customer’s account.

    “We do not keep this kind of money in any special account. Someone owns it and the banks know the accounts from where they made the deductions. So, we mandate them to pay it back into the accounts.”

    He, however, expressed the apex bank’s continued commitment to customers’ protection, adding that the interactive session was aimed at educating stakeholders, particularly labour unions, on some of the financial policy drives of the CBN.

    Okorafor stated that such financial initiatives were targeted at closing the gaps in the economy to foster development and safety of citizens.

    On the Bank Verification Number, the acting director explained that the initiative was brought into the banking system to solve the challenges of customer identification based on finger prints.

    “People use different names to open different accounts for different reasons and purposes; but with the help of the BVN, we should be able to know who is operating what account irrespective of the name. This has made criminals and fraudsters, who are operating secret accounts, to abandon their accounts in order not to be caught,” he stated.

    The Vice President, Industrial Global Union, Mr. Issa Aremu, expressed gratitude to the CBN Governor, Mr. Godwin Emefiele, for interfacing with labour unions on financial literacy since the past three years.

  • Forex: Again, CBN boosts supply, releases $195m into market

    Forex: Again, CBN boosts supply, releases $195m into market

    The Central Bank of Nigeria (CBN) on Monday, intervened in inter-bank Foreign Exchange Market with the supply of 195 million dollars as part of effort to stabilise the market.

    The acting Director, Corporate Communications of the apex bank, Mr Isaac Okorafor, in a statement, said 100 million dollars was offered through the wholesale segment.

    He said that Small and Medium Enterprises (SMEs) segment received 50 million dollars, while tuition fees, medical payments and Basic Travel Allowance (BTA), among others, got 45 million dollars.

    Okorafor said that the CBN was pleased with the state of the market, and assured that the bank would continue to intervene in order to sustain liquidity in the market and guarantee international value of the naira.

    He said the apex bank remained determined to achieve its objective of rates convergence, “hence the unrelenting injection of intervention funds into the foreign exchange market’’.

    Okorafor expressed optimism that the naira would sustain its run against the dollar and other major currencies around the world, considering the level of transparency in the market.

    He, therefore, advised stakeholders to abide by the guidelines to ensure transparency in the market.

    TheNewsGuru.com reports that just last week, the CBN intervened in the various segments of the foreign exchange market with the injection of 396.8 million dollars.

    Meanwhile, the naira continued to maintain its stability in the market, exchanging at an average of N364 to a dollar in the Bureau de Change segment of the market.

     

  • DMBs dare CBN, resume bank-to-bank forex sales without approval

    DMBs dare CBN, resume bank-to-bank forex sales without approval

    Indications have emerged that some Deposit Money Banks, DMBs, in the country have commenced direct sell of foreign exchange (forex) to one another, without seeking prior approval of the Central Bank of Nigeria (CBN).

    The policy shift became exigent following the improvement in forex supply to key segments of the market, a development that has shored up market confidence.

    A top manager in one of the Tier-1 lenders, who disclosed this at the weekend, said the CBN had in the heat of the forex scarcity stopped commercial banks from selling foreign exchange to one another, unless they had its approval.

    But the regulator has in the last few weeks reversed the policy. It now allows lenders to sell foreign exchange to one another. But there is a condition: ”In bank-to-bank forex deals, the buying bank must not resell to another lender, except to end-users”.

    The source, who spoke anonymously because she was not supposed to disclose such development to the public, said: “The CBN has lifted restrictions on banks not to sell forex to one another except it is approved by the regulator. Today, banks can sell forex to one another, but the buying bank cannot resell to another lender, except to an end-user”.

    According to the source, the CBN has since January, spent over $7.7 billion to stablise the forex market. The Investors’ & Exporters’ FX Window currently records about $80 million daily turnover, with the CBN contributing about 15 per cent of the transactions.

    The Investors & Exporters Forex Window was introduced by the CBN on April 24. About $3.83 billion has been traded through the window since inception. The window has impacted positively on the naira. The window, where buyers and sellers are free to agree an exchange rate, was introduced to attract foreign investors and boost the supply of dollars.

    Traders said $407 million was traded last week as against $354.8 million in the previous week, indicating a gradual return in investors’ confidence in the forex market.

    There has been continuous improvement in dollar inflow into the market from offshore investors, a trend that has also reflected in the volume of transactions at the equity market. Before the window came on board, the CBN was the main supplier of hard currency on the interbank forex market, after foreign investors fled naira assets in the wake of an oil price slump in 2014.

    Aside establishing the Investors’ & Exporters’ FX Window, the CBN also opened a special forex window for SMEs. The window, which allocates $20,000 per business per quarter, helps the SMEs import “eligible finished and semi-finished items” needed for their businesses. The CBN said the bank’s special intervention was necessitated by its findings that many SMEs were being crowded out of the forex space by large firms.

    “The sum of $20,000 per SME customer per quarter can be done through telegraphic transfer, subject to completion of Form ‘M’ supported with a pro forma invoice and the importer’s Bank Verification Number (BVN),” it said.

    All the processing banks are to ensure that the importers submit shipping documents not later than 60 days from the date of the transfer.

     

  • Disclose interests accruing from Nigeria’s foreign reserves, Dogara tells CBN

    Disclose interests accruing from Nigeria’s foreign reserves, Dogara tells CBN

    The Speaker of the House of Representatives, Mr Yakubu Dogara on Thursday challenged the apex bank (Central Bank of Nigeria) to disclose exact figures of the interests to Nigeria’s foreign reserve accounts.

    Speaking when a delegation from the Fiscal Responsibility Commission (FRC) visited him in Abuja, he said that agencies like the Commission should be in custody of such figures for dissemination to the public when necessary.

    TheNewsGuru.com reports that the House had on Dec.15, 2015, passed a resolution calling on the CBN to declare interests accruing on the foreign reserves accounts of the federation.

    “We earn interest on foreign reserves, like Botswana. They don’t have oil but the interest on reserve is their second highest revenue source after natural resources.

    “You will see it as a budget item, interest earned from foreign reserves.

    “In Nigeria, we have been asking the question, `are we earning or are we just running charity with it or just leave people to manage it?

    “Are we capitalising the interest and what is the interest; nobody has ever told us,’’ Dogara said.

    He said that CBN was the custodian of foreign reserves.

    But, he pointed out that if they are not forthcoming with regards to what had been happening with the interest earned on foreign reserves, there should be an agency of government to handle it.

    The speaker also sought to know why the ceiling on borrowing as stated in the FRC Act was not adhered to, saying “do we continue borrowing until we have borrowed billions?

    “The Fiscal Responsibility Act speaks to those things, so, why is it that it is not being done?’’ he asked.

    He said that there was urgent need for the government to properly fund the commission to enable it to deliver on its mandate and strengthen its powers.

    According to Dogara, the commission has the capacity to reduce corruption by over 80 per cent.

    He said that the approach adopted by the government to fight corruption through the EFCC to punish corruption offenders after the crime has been committed should be redirected to checking the root of the problem.

    He said that the motive for, or the reason for the establishment of FRC was for Nigeria to have an agency that would ensure that it had efficient allocation of resources.

    According to the speaker, once resources in a country are not efficiently allocated, or in an efficient manner, there is bound to be dislocation in the economy of that country.

    “If we hope to get the best from agencies such as this, it means that we have to resolve across board to put some resources at the disposal of the agency.

    “But, if we think that we cannot fund the agency and the agency will live up to expectations, I think we are only deceiving ourselves.

    “From the way we are fighting corruption, it is like emphasis is built on EFCC, but the problem with that approach that you are dealing with symptoms of corruption and corruption is like a tree.

    “Once you continue to deal with the leaves and the fruits, and the root is still there, you cannot totally eliminate corruption.

    “These are preventive agencies and we ought to invest more in agencies such as the Fiscal Responsibility Commission because we have to make it difficult for corruption itself to take place.

    “Once we do that, we will be applying the remedy at the root of corruption.

    “There is no limit to the kind of attention we can pay to agencies like this because this is the right way to combat corruption itself to ensure that resources are efficiently allocated and that we have fiscal discipline.

    “Once we have done that, we would have reduced incidents of corruption by perhaps, over 80 per cent,’’ he said.

    Earlier, Chairman of FRC, Mr Victor Muruako, urged the speaker to facilitate the speedy amendment of the Act establishing the commission.

    He said that there was need to empower the Commission to retain a percentage of the operating surplus it collected from ministries, departments and agencies on behalf of the Federal Government.

    “This is in order to boost its activities and grant it financial independence.’’

     

     

    NAN

  • Stop mutilation of naira notes, we spend billions printing it — CBN tells Nigerians

    …Says its symbol of national sovereignty

    The Central Bank of Nigeria (CBN) has condemned the mutilation of naira notes, saying it represents an abuse on national sovereignty.

    Mr. Isaac Okorafor, CBN’s acting Director of Corporate Communications, made the condemnation in an interview with newsmen on Wednesday in Abuja.

    According to Okorafor, the mutilation of the naira as perpetrated by members of the public at wedding ceremonies and parties end up damaging the currency.

    He, therefore, called on Nigerians to treat the nation’s currency with respect.

    “You see it is unfortunate that Nigerians do not take pride in symbols of our national sovereignty.

    “The Naira is a symbol of our National sovereignty.

    “We have embarked on sensitisation across the nation and we have gone to 28 states of the federation in the last one year, trying to tell Nigerians how to identify fake Naira notes, counterfeits notes and how to handle the naira with care.

    “In some cases, we have distributed wallets so that people can put their money neatly.

    “For us, it is so frustrating that not many Nigerians are listening to it.

    “We spend a lot of money printing these bank notes.

    “And we print a banknote, release a bank note on a Friday, people go to parties they dance on them.

    “They go to churches, they squeeze it and put it in offering and by Monday it is already old and mutilated and we spend hundreds of billions of Naira on printing these note.

    “It is so unfortunate.’’

    He said that under no circumstance should the Naira be squeezed or reduced to a piece of paper for writing.

    On hawking and sale of newly printed Naira notes popular known as “mints’’, Okorafor said that the apex bank was working with the police to stop the illegal practice.

    Section 20 and 21 of the CBN Act recommends that whoever sells, buys, sprays and squeeze the naira, will be imprisoned for six months or given an option of N50,000 fine, or both.

    Okorafor said that the police carried out raids in Abuja and Lagos, where mint vendors were arrested and their monies seized.

    “On our side internally, we have made it clear to all that any CBN staff that is found complicit in any of this act, will be summarily dismissed.

    “That is our position,’’ he said.

    The CBN spokesman also gave reasons why there are so many mutilated Naira notes in circulation, especially the lower denominations.

    “The first one is the fact that people handle these notes so badly and so within a short while they don’t get to their lifespan anymore and for the lower denomination notes, they have a higher velocity of circulation.

    “What that means is that you use it more often and as you use it in exchange, it gets worn out it gets torn more frequently. So that also creates another problem.

    “Another factor is that the banks that have the duty to bring back to us mutilated notes do not do their jobs well.

    “Banks are supposed to sort the notes into unfit notes and then when they are bringing the notes back to us, they bring those ones that they have sorted and brought out as unfit and worn out.

    “But they don’t do that. And what we do, if they bring it back to us like that, we do the sorting and charge them because it is a job they have failed to do.

    “But then, what we have discovered is that banks instead of bringing these notes like that for us to sort them and charge them, they will re-circulate it.’’

    Okorafor said that the apex bank would soon release new regulations concerning the role of banks in taking mutilated notes out of circulation.

    The CBN spokesman stated that the bank plans to print more money, especially the lower denominations, to ease pressure on the Naira notes already in circulation.

     

     

    NAN