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CBN raises intervention at interbank market to $6m – Today

A day after fine-tuning the foreign exchange policy, the Central Bank of Nigeria (CBN) made good its pledge to increase daily intervention at the interbank market, raising it from $1.5 million to $6 million.

However, the official exchange rate remained at N305.25 per dollar, although the CBN’s intervention was auctioned at N304.75 per dollar.

The move is part of efforts to ease acute forex scarcity and reduce the wide gap between the official and parallel markets.

Already, a broad gauge of the parallel forex market has shown that naira has gained N4 to settle at N516 per dollar, having depreciated to N520 per dollar on Monday, in reaction to the policy.

The Managing Director of Cowry Asset Management Limited, Johnson Chukwu, said the new policy was felt in the market yesterday and the local unit appreciated in return.

For him, the challenge remained the long term sustainability of the policy with respect to supply of the currency to the market, increased inflow through stable crude oil price, production and foreign investments.

Meanwhile, CBN has planned a N310.22 billion treasury bills’ auction for next week, with a 91-day bill worth N26.14 billion; 182-day, N62 billion; and 12-month bill, N222.08 billion.

The move is part of efforts to raise funds for the 2017 budget deficit, control quantity of money in circulation and step up fight against inflation that is currently at 18.72 per cent.

To achieve the goals of the new policy, CBN said all banks would receive amounts commensurate with their demand per week, while it would support the inter-bank market to ensure adequate liquidity.

Pursuant to this, the apex bank yesterday sold $500 million on a 60-day forward contract, as opposed to 180-day contract before now, to help boost dollar supply in the forex market.

Similarly, the Federal Government wants to take advantage of the policy revision to strike a new deal with the World Bank to the tune of $1 billion.

The Minister of Finance, Mrs. Kemi Adeosun, who made the disclosure in a monitored programme, said beside plans to borrow the amount, government also hopes to sign $1.3 billion loan from China’s Export-Import Bank for the railway projects soon.

“IMF is really a lender of last resort when you have balance of payments problem. Nigeria doesn’t have balance of payments problems now. It only has a fiscal problem.

“Already, we are doing much reform like IMF would want, but we want to take responsibility for our future. We must have our home-grown, home-designed programme of reform,” she said.

Naira firms up, stock market gains, as new forex policy takes effect – The Cable

The naira moved to 515 per dollar on Tuesday, following the introduction of new policy actions by the Central Bank of Nigeria (CBN).

The naira, which was trading at 520 to the dollar on Monday, after falling from 510 the previous week, firmed on Tuesday evening, at the parallel market.

Nigerian Stock Exchange (NSE) also gained over N740 million on Tuesday, following the policy implementation.

The capital market saw its market capitalisation move from N8,738,370,947,609.24 on Monday to N8,739,112,337,168.61, while all share index gained a few more points on the trading floor, to hit 25,251.63

About 24 hours later, the apex bank, which went to the market with $500 million, sold $370.9 million to 23 banks at rates between N315 to N360 per dollar.

On Monday, the CBN introduced fresh policy actions, which seek to provide more foreign exchange for Nigerians, seeking its use for personal and business purposes.

Lukman Otunuga, research analyst at FXTM, describe the policy adjustment as a logical move by the apex bank.

“With the dollar demand for school fee payments overseas and personal travel allowance enforcing downside pressures on the parallel market, the move by the CBN to sell dollars to retail users via commercial lenders seems logical,” he said.

The CBN says it remains committed to ensuring adequate liquidity flows in the foreign exchange market.

24 hours after new policy, CBN injects $371m into forex market – The Cable

About 24 hours after The Central Bank of Nigeria (CBN) announced fresh policy actions in the foreign exchange market, the bank has pumped $370.9 million into the forex market.

On Tuesday, the apex bank carried out wholesale interventions in the interbank forex market by trading a total of $370,810,810.79 to 23 banks “to meet the visible and invisible requests of customers”.

A source at the CBN said the qualified bids ranged from N315 to N360 per dollar, adding that seven banks received full allotments of their respective bids valued at $37,500,000 each.

“Other banks received allotments ranging from $46, 512.50 to $15,578,081.51,” the source added.

Isaac Okorafor, acting director, CBN corporate communications department, said the bank’s intermediation in the forex market was the first wholesale intervention aimed at easing the pressure of access to forex by Nigerians who intend to meet obligations that fall under visible and invisible needs categories.

He explained that the CBN offered $500,000,000.00 for sale to the banks, but not all of them provided enough naira backing to pay fully for their respective bid amounts.

On Monday, the CBN unveiled new policy actions to make forex readily available for personal and business travels, medicals and school fees.

As part of its new policy action, the CBN also directed all banks in the country to open forex retail outlets at major airports as soon as logistics permit them to do such.

In line with the new policy, the CBN also made spot sales of $6 million to four banks, and sold $35 million for the payment of school fees, medical bills and personal and business travel allowances.

Nigeria steps up dollar sales after devaluing FX rate for retail customers – Reuters

LAGOS Feb 21 (Reuters) – Nigeria’s central bank stepped up dollar sales on the interbank currency market on Tuesday, traders said, a day after the bank effectively devalued the naira for retail currency sales.

The bank sold a total of $6 million to commercial banks at 304.75 per dollar, Reuters data showed, far more than its regular $1.5 million, traders said.

Earlier, the central bank said it would sell $500 million on a 60-day forward contract to help boost dollar liquidity on the interbank market. (Reporting by Chijioke Ohuocha; Editing by Catherine Evans)

 

Naira hits 520/dollar, forex retailers examine CBN action – Punch

Oyetunji Abioye

The naira tumbled to 520 against the United States dollar at the parallel market on Monday as scarcity of the greenback continued to keep the exchange rate in a free fall mode.

The naira had closed at 516/dollar on Friday, after hitting 510/dollar and 507/dollar last Thursday and Tuesday, respectively.

Experts said demand for dollar for school fees payment overseas as well as Personal Travel Allowance by intending travelers was taking a toll on the exchange rate at the parallel market.

This came just as retail currency traders tried to digest the Central Bank of Nigeria’s new decision to sell dollars to retail users through commercial banks, Reuters reported.

The CBN is planning to sell $1m weekly to each of the country’s 21 commercial banks at a rate of N375 to clear a backlog of demand for retail users and try to narrow the premium between the official and black market rates.

Retail currency users buy dollars from licensed Bureaux de Change operators. However, due to the CBN’s inability to meet dollar demand, the BDCs have tended to source dollars from private sources and resell at a much higher margin, fueling the black market.

Forex traders told Reuters that some banks had compiled a list of bids from customers awaiting dollars.

The CBN has been selling dollars at N305 to clear a backlog of demand from manufacturing, agriculture and airline companies, hoping also to help drag the country out of its worst recession in 25 years.

Experts are divided over the outlook for the naira this year. Some experts have said the naira may hit between 520/dollar and 1000/dollar at the parallel market this year unless the CBN reviews its forex policy.

An economic expert and Chief Executive Officer of CocoSheen Nigeria Limited, Mr. Henry Boyo, said the naira would hit 1000/dollar unless the central bank reviewed its monetary policy framework.

He said the framework was skewed against the naira.

CBN demands foreign exchange outlets at airports – NAN

To ease the burden of travellers, the Central Bank of Nigeria (CBN) has directed all banks to open Foreign Exchange outlets to sell dollars and other hard currencies at major airports.

According to a statement signed on Monday by the CBN acting Director of Communications, Mr Isaac Okorafor, the banks are to do so as soon as logistics permit.

Okorafor said that this would also ensure that transactions were settled at much more competitive exchange rates.

“Similarly, the CBN is providing direct additional funding to banks to meet the needs of Nigerians for Personal and Business Travel, Medical needs, and School fees, effective immediately.

“For medical and school fees, such payments must be made by commercial banks directly to the institution specified by the customer.

“The CBN would ensure that this process is as smooth as possible and that as many customers as possible get the foreign exchange they genuinely demand.

“The CBN expects such retail transactions to be settled at a rate not exceeding 20 percent above the interbank market rate,” he said.

Okorafor said that the apex bank had also reduced the tenure of its Forward Sales from the current maximum cycle of 180 days, to not more than 60 days from the date of transactions.

“In order to maintain confidence in the FX market, the CBN will immediately begin implementing its articulated programme to clear all the unfilled orders in the interbank FX market.

“Given our plan to meet all unfilled orders, and provision of FX to the manufacturing sector would remain the CBN’s strong priority, we will no longer impose allocation rules on commercial banks.

“We will implement an effective intervention programme to support the inter-bank market to ensure adequate liquidity necessary to deliver an efficient FX market,” he said.

Okorafor said that the FMDQ trading had also been advised to activate its Foreign Exchange Order-Book systems as soon as possible and also accelerate the onboarding of FX clients on the FX Relationship Systems to ensure total transparency of the FX market.

The apex bank urged market participants to assist in ensuring that these new measures were followed to preserve the external reserves, the stability of the financial system and economic growth for the benefit of all Nigerians.

$16,000 PTA per year, $15,000 per semester…CBN guidelines for adjusted forex policy – The Cable

The Central Bank of Nigeria (CBN) says every Nigerian, 18 years or older, is entitled to $4,000 per quarter of $16,000 per year for personal travel allowance (PTA) under the guidelines for the adjusted foreign exchange policy.

On Monday, CBN announced adjustments to its existing foreign exchange policy, directing banks to open sales point across major airports in the country.

In a circular signed by Alvan Ikoku, CBN director of financial markets department, the bank said “PTA shall only apply to journeys of not less than five hour flight time”, with the flight originating from Nigeria.

CBN also said every applicant shall present a tax clearance certificate, a Nigerian passport, and bank verification number (BVN).

On school fees payment, the apex bank said Nigerians can get as much as $15,000 per semester for university education only.

The bank said the funds will be paid directly into the University’s account, based on presented invoice and valid admission letter.

CBN was silent on the guidelines for application for foreign exchange, as it regards medical trips.

Nigeria to sell $500 mln after devaluing FX rate for retail customers -traders – Reuters

LAGOS Feb 21 (Reuters) – Nigeria’s central bank will sell $500 million on a 60-day forward contract to help boost dollar liquidity on the interbank market, traders said on Tuesday, a day after it effectively devalued the naira for retail currency transactions.

The central bank said the special intervention will be via a “wholesale bid” whereby commercial lenders will apply for a particular dollar amount as opposed to submitting individual customer demand.

Lenders will then allocate the U.S. currency to their customers, the central bank said in a mail to commercial banks, asking them to maintain the bid spread of 0.50 naira. (Reporting by Chijioke Ohuocha; Editing by Catherine Evans)

 

Nigeria tests waters for possible broad naira devaluation – Reuters

* Nigeria hit by dollar shortage due to low oil price, FX curbs

* President Buhari has spoken against devaluation of the naira

* Oil producer has five exchange rates confusing firms, investors

* Business-friendly vice president in charge as Buhari is away (Recasts)

By Ulf Laessing and Chijioke Ohuocha

ABUJA, Feb 20 (Reuters) – Nigeria effectively devalued the naira for private individuals on Monday, paving the way for a possible broader move despite stiff resistance from President Muhammadu Buhari.

With Buhari abroad for medical treatment and the country’s currency exchange system in chaos, the central bank said Nigerians wanting dollars for travel or to pay foreign school fees could buy dollars at nearly 20 percent above the official rate.

Some Nigerians saw the announcement as a step towards implementing a more flexible currency regime and narrowing a yawning gap between the official and black market rates. However, that did not necessarily mean the authorities were yet ready to allow a free-float for the naira currency as Nigeria struggles with its first recession in a generation.

Monday’s announcement covers about 20 percent of total foreign exchange demand and allows those wealthy families who send their children to schools and universities abroad to buy foreign currency at a rate of around 366 naira to the dollar.

This is less favourable than the official rate of 305 which commercial importers typically use, but vastly more advantageous than on the black market where most individual Nigerians have to buy dollars due to hard currency shortages in the banking system.

Dealers said the naira hit a record low of 520 on the black market after the central bank’s announcement.

Nigeria has tried to make the exchange rate more flexible before, leading to a 30 percent devaluation last year, only to reimpose a quasi currency peg.

Analysts say the central bank, which has been under pressure from Buhari to maintain a strong exchange rate even at the cost of economic growth and investment, was testing the waters for a possible broader devaluation in the near future.

Buhari, a 74-year-old military ruler, has been in London for the last month, leaving Vice President Yemi Osinbajo – a business-friendly lawyer who does not share his boss’s enthusiasm for a strong naira – in charge.

“I think this is the beginning of a process to a more flexible forex system,” said Bismarck Rewane, a leading economist and CEO of Lagos consultancy Financial Derivatives. “There is panic. The system has collapsed. Dollars have disappeared at exchange bureaus at airports,” he said.

Opponents of a more flexible naira say a heavy devaluation would push up the price of imported goods on which Nigerians depend, and endanger fuel subsidies.

With Nigeria hit by low prices of its oil exports, the government wants to finalise a reform plan this month. This is needed to get a loan from the World Bank that would help to fund a record budget aimed at stimulating its economy.

Such a loan would come at a price. “The World Bank is going to insist on a more flexible forex policy,” said Charles Robertson, global chief economist at Renaissance Capital.

The African Development Bank is also applying pressure and has criticised hard currency curbs imposed by the central bank. The lender has held back a second tranche of a loan worth $400 million to demand a reform plan.

Robertson said a devaluation would make sense after Nigeria’s sale of $1 billion in Eurobonds – this would boost naira revenues and lower the need to issue domestic bonds to fund the budget.

The central bank could not be reached for comment.

POLITICS

Western diplomats says Osinbajo and technocrats have been quietly pushing for a currency float but hit resistance from Buhari and aides with similar military backgrounds.

The vice president used another Buhari absence last year to unveil the idea of a more flexible rate which led to the 30 percent devaluation weeks later.

Buhari had agreed to the move but questioned its logic just a week later, after which the central bank gave up the original idea of a free float by introducing a new quasi-peg.

In a sign that things might be moving again, Osinbajo, a lawyer from the commercial capital Lagos, chaired last week a meeting of the National Economic Council, the top state advisory body, demanding an urgent forex review.

Central bank governor Godwin Emefiele, who has toed Buhari’s line, was present at the meeting, saying that patience was needed and everything was under “under control”, an attending deputy governor has said.

Some investors warned against reading too much yet into the central bank announcement. Kevin Daly, Portfolio Manager Emerging Market Debt at Aberdeen Asset Management, noted Nigeria now has several exchange rates.

“But I don’t think it signals an imminent change to a free float. I think that is something that they are – certainly under the existing leadership – going to want to avoid,” he said.

The central bank has boosted its foreign reserves in the past few weeks to a 19-month high of $29 billion, hoping it will attract investment. This also prepares the bank to defend a new exchange rate.

But oil revenues are below plan due to the closure of an export pipeline after a militant attack, reducing the flow of dollars to manufacturers via the banking system. Importing firms have been therefore forced to buy more from the black market, which has worsened the naira’s battering.

A Lagos-based senior banker said the new rate for school fees was a test balloon to see where the market could be heading. “I think they want to start with some of the smaller elements of demand, devalue that part of the market and then see what happens in the market,” he said, asking not to be named.

TABOO

With Buhari practically banning use of the word “devaluation” the central bank could launch more rates for certain imports or travel allowances.

This would add more flexibility but also confusion. The West African nation already has at least five exchange rates including the official one, a rate for Muslim pilgrims going to Saudi Arabia, the one for school fees and a retail rate set by licensed exchange bureaus at 399.

Finally the is the rate offered by the black market changers operating under trees or in parking lots with nervous customers hurrying to count their money before any police raids.

The biggest concern for the government is that a devaluation would hit the poor suffering already from recession. The subsidised fuel sale price of 145 naira a litre would also be difficult to keep.

“At this stage, it is all speculation,” said Shahzad Hasan, portfolio manager emerging markets fixed income at Allianz Global Investors. “It is possible that they could be moving to some sort of managed float, or they could do some FX policy adjustment or some kind of a peg.” (Additional reporting by Camillus Eboh, Karin Strohecker and Sujata Rao; Writing by Ulf Laessing; Editing by Ed Cropley by David Stamp)

CBN caves in to pressure, releases new forex guidelines – Today

The Central Bank of Nigeria (CBN) in apparent response to the cries of Nigerian over the suffering occasioned by the scarcity of foreign exchange, has released some amendments to the current policy.

In a statement on Monday by its Acting Director of Corporate Communications, Isaac Okorafor, the CBN listed major areas it intends to make changes.

Such includes the sale of foreign exchange by Deposit Merchant Banks at international airports to travelers, provision of travel allowances for personal and business purposes and for school and medical purposes.

The statement by Okorafor reads in full:

New Policy Actions in the Foreign Exchange Market

In continuation of efforts to increase the availability of Foreign Exchange in order to ease the difficulties encountered by Nigerians in obtaining funds for Foreign Exchange transactions, the Central Bank of Nigeria (CBN) is providing direct additional funding to banks to meet the needs of Nigerians for Personal and Business Travel, Medical needs, and School fees, effective immediately. The CBN expects such retail transactions to be settled at a rate not exceeding 20 percent above the interbank market rate.

A. Travel Allowances

Having cleared the historic backlog of matured letters of credit at the inception of the current flexible exchange rate system, the CBN would immediately begin to provide foreign exchange to all commercial banks to meet the needs of both personal travel allowances (PTA) and business travel allowances (BTA) for onward sale to customers. All banks would receive amounts commensurate with their demand per week, which would be sold to customers who meet usual basic documentary requirements.

B. School and Medical Fees

Similarly, the CBN would meet the needs of parents, guardians and sponsors who are seeking to make payments of school and educational fees for their children and wards. Such payments must be made by commercial banks directly to the institution specified by the customer. The CBN would ensure that this process is as smooth as possible and that as many customers as possible get the foreign exchange they genuinely demand. This would also apply to customers seeking to make payments, or purchase foreign exchange, for medical bills and paid directly to hospitals. The supply of FX to retail end-users (PTA, BTA, School fees, medical bills, etc) would be sustained by the CBN.

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C. Forward Sales Tenor

In order to further increase the availability of foreign exchange to all end-users, the CBN has decided to significantly reduce the tenor of its forward sales from the current maximum cycle of 180 days, to no more than 60 days from the date of transaction.

D. FX Sales at Major Airports

In order to further ease the burden of travellers and ensure that transactions are settled at much more competitive exchange rates, the CBN hereby directs all banks to open FX retail outlets at major airports as soon as logistics permit.

E. Increase Efficiency of FX Market

In order to maintain confidence in the FX market, the CBN will immediately take the following steps:
a. Begin implementing its articulated program to clear all the unfilled orders in the interbank FX market;
b. Given our plan to meet all unfilled orders, and while provision of FX to the manufacturing sector would remain the CBN’s strong priority, we will no longer impose allocation/utilization rules on commercial banks;
c. Implement an effective intervention programme to support the inter-bank market to ensure adequate liquidity necessary to deliver an efficient FX market;
d. Advise FMDQ to activate its FX Order-Book systems as soon as possible and also accelerate the on-boarding of FX clients on the FX Relationship Systems to ensure total transparency of the FX market.

Given the CBN’s objective to continuously and vigorously pursue a transparent, liquid, and efficient FX Market, the Bank reiterates it would neither tolerate unscrupulous actions nor hesitate to bring serious sanctions on offenders, be they banks or their staff. The Bank therefore encourages market participants to assist in ensuring that these new measures engender the preservation of our external reserves, stability of our financial system, and growth of our economy to the benefit of all Nigerians.