Supply Glut: Banks Now Seek Customers to Buy FX
Obinna Chima with agency reports
Banks are now looking for customers to buy the surplus greenback currently in their vaults, following the recent interventions by the Central Bank of Nigeria (CBN) in the interbank market.
In a bid to close the gap between the interbank and parallel market rates, the CBN has sustained its intervention in the foreign exchange (FX) market and has resolved to continue to flood commercial banks in the country with dollars.
However, the banks are now reported to be holding excess FX and are seeking customers to buy dollars.
So far, the banks have cleared the backlog of pent-up demand for the greenback for personal/basic travel allowances, school fees and medicals.
A banker told the News Agency of Nigeria (NAN) that his bank had so much dollars that its officials were asked to encourage customers to request for the greenback.
The source said that the bank wants to avoid a situation where it would be forced to return excess FX to the CBN, as doing so might force the CBN to reduce the quantity of FX sold to the bank.
Another source from FirstBank also confirmed that the bank has succeeded in clearing all pending requests for the greenback as far back as September 2016.
Also, a source in Guaranty Trust Bank (GTBank) commended the decision of the CBN to flood the market with FX, thereby allowing the bank to meet the legitimate requests of its customers.
It was also gathered from Heritage Bank that prior to the interventions by the CBN, the bank just needed one page in the newspapers to publish the names of individuals and companies to which it sold FX.
“Right now, we take two or three pages in the newspapers to publish the names of legitimate individuals and companies that we disbursed FX to.
“We have more than enough foreign exchange to meet the request of our customers for school fees and others,” an official of Heritage Bank said.
So far, the CBN has pumped $1.370 billion for both wholesale and retail interventions into the interbank FX market since it announced the new FX policy measures about three weeks ago.
Also, the Managing Director of Fidelity Bank, Mr. Nnamdi Okonkwo, dismissed speculations in some quarters that banks were not fully complying with the new FX policy actions introduced by the CBN.
Okonkwo said at a forum in Lagos on Monday that banks had since cleared the backlog of school fees, PTA, BTA and medicals after the CBN channelled huge dollar disbursements to the market.
He said: “Banks are united with the CBN’s new forex measures. In fact, the meeting we had before the announcement was made lasted for almost five hours.
“The measures have been very successful and most banks have cleared the demand backlog for PTA.”
The Fidelity Bank MD, who said the initiative was “on course”, pointed out that the central bank was adopting various strategies to ensure that it achieves its objectives.
“I got a call from the CBN governor, reporting one of the Fidelity Bank branches that failed to pay PTA to a customer. I quickly contacted the branch and was informed that the customer came with fake documents,” he explained.
He said the CBN was doing everything possible to ensure that there is adequate dollar liquidity in the system and that all genuine FX demand is met.
Commenting on developments in the market, the Chief Executive Officer, Economic Associates, Mr. Ayo Teriba, expressed optimism that the CBN would be able to sustain its interventions in the market.
Teriba said that the rise in oil production and high oil prices had helped to increase the foreign reserve base of the country.
“We are back to a situation where the foreign exchange at the disposal of the CBN is likely to go up. The CBN could not intervene in the FX market in 2016 because of low oil production, low prices and because foreign reserves were also low.
“Today, oil price is up, reserves have also gone up, the outlook for oil prices is stable and production in Nigeria is going back to capacity, so it has the capacity to intervene.
“In a couple of months, the central bank should be able to meet all of the demand and the multiple exchange rates will converge,” he said.
There were indications at the weekend that the CBN would remain unrelenting in providing liquidity to the interbank FX market and would inject more dollars into market this week.
CBN spokesman, Mr. Isaac Okorafor, in a chat with THISDAY on Monday, revealed that the CBN intervenes in the interbank market with $1.5 million daily.
He also disclosed that the central bank would carry out a special wholesale intervention through FX forwards auction as well as for invisibles on Tuesday.
But the CBN spokesman declined to reveal the amount of dollars that will be auctioned by the Bank.
Reuters also quoted traders as stating that the central bank sold dollars Monday at its highest level on the official interbank market since August, effectively pushing down the naira.
The local currency fell to N306 per dollar on the interbank market from the N305.50 level it has traded since last year.
Traders said the central bank intervened at N305.50 Monday and then commercial lenders resold dollars at a 0.50 naira margin. A total of $6.25 million was traded.
On the parallel market, however, the naira appreciated to N460 to the dollar, stronger than N463 during trading last Friday.