CBN Offics
• Divestment by foreign investors, school fees account
for bulk of dollar demand • Banks seek to cut forex
provisions for school fees • Oshiomhole backs Buhari
on naira devaluation
Obinna Chima, Shola Oyeyipo in Lagos and James
Emejo in Abuja
Following the consensus reached by the Bankers’
Committee to publish the returns on utilisation of funds
bought from the Central Bank of Nigeria (CBN), a
review by THISDAY of the returns published on
Thursday by all the Tier 1 banks, including Stanbic
IBTC Limited and Diamond Bank Plc for the first
two weeks of February, has shown that Stanbic
IBTC Limited with total of $23,615,680.90 reported
the highest amount of forex purchased from the CBN
on behalf of its customers.
Stanbic IBTC was followed by First Bank of
Nigeria Limited (FirstBank) and Guaranty Trust
Bank Plc (GTBank), with $19,774,888.26 and
$19,709,354.41, respectively.
Also, Zenith Bank Plc with total returns of
$18,707,309.97 came in fourth, while Diamond Bank
reported returns of $17,515,474.
Access Bank reported returns of $16,982,208.04 to
occupy the sixth place, while the United Bank for
Africa Plc (UBA) reported returns of $12,045,150.76.
By Thursday, only seven banks had published their
returns on utilisation of funds purchased from the
CBN, with others expected to do so today.
The publications from the banks showed that divestment
by foreign portfolio investors from the equities and bond
markets accounted for a largest chunk of forex , in
terms of value, bought by Stanbic IBTC from the
CBN, cementing its place as the largest stockbroking
firm in the country.
Stanbic IBTC returns showed that BNP Paribas,
Brown Brothers Harriman/Stanbic Nominees,
HSBC Funds Services London, JPM London, JPM
Securities, Northern Trust London, State Street/
Stanbic Nominees, the Bank of New York, were some
of the investment banks that it sold forex to following
their divestment from Nigeria’s stock market , treasury
bills, as well as FGN Bonds.
It also sold dollars for the importation of machinery
parts, polypropylene and printing machines, among
others.
After divestments from the capital market, the purchase
of foreign exchange for other invisibles such as school
fees, business travel allowance (BTA) and personal
travel allowance (PTA), got the second highest volume
as shown in the publications reviewed by THISDAY.
Of the three invisibles – school fees, PTA and BTA –
the payment for school fees abroad featured most
prominently on all the lists of the seven banks.
In the case of FirstBank, its returns on utilisation of
the $19.77 million it bought from CBN, showed a
diverse allocation to various sectors of the economy.
The sectors were petroleum, manufacturing,
agricultural, machine spare parts, pharmaceutical
packaging materials, industrial chemicals, bottling
machinery spares, poultry meal, raw materials for paper
production, school fees, and PTA/BTA, among
others.
On the other hand, of the $19.71 million bought by
GTB on behalf of 293 firms/individuals, 234 firms/
individuals got forex allocations for school fees, while
25 firms/individuals got for PTA/BTA.
However, the value of forex for the importation of
industrial raw materials as well as industrial spare
parts, pharmaceutical products, and aluminium windows
and doors by GTBank was higher.
Also, Zenith Bank Plc’s returns showed that the bank
sold a total of $18.71 million to 348 customers. Zenith
Bank’s distribution of forex purchased by its customers
showed that a large portion was allocated to the
payment of school fees. But some customers were sold
dollars for the importation of industrial raw materials,
machine tools, and consumables for coding machines,
among others.
Similarly, Diamond Bank Plc’s returns, revealed that
most of its customers purchased forex for the payment
of school fees. A total of 165 of the bank’s customers,
out of the 246 who bought dollars from the bank did so
to pay school fees.
Nevertheless, Diamond Bank also sold forex to some
customers to import fabricated structural steel, project
cargo, raw materials for furniture, and PTA, among
others.
Just like some of its peers, Access Bank sold forex to
140 firms and individuals to pay school fees out of 166
of its customers, while the remaining 26 customers on
the bank’s list, purchased forex for PTA.
In the same vein, the bulk of UBA’s forex was sold to
customers paying for school fees abroad as well as for
PTA.
Commenting on the utilisation of forex by the top seven
banks in the country, a top banker explained to
THISDAY that “forex consumption is a function of
the volume of business a bank does, particularly with
the larger corporates and manufacturing firms that use
huge chunks of forex”.
When contacted on the decision by commercial banks to
publish their returns on foreign exchange utilisation,
CBN’s Director, Corporate Communications, Mr.
Ibrahim Muazu, explained that it was done to improve
transparency in the allocation of forex to the banks.
According to him, banks would be publishing their
returns almost weekly.
“There was a time when the banks were doing this.
This is to make sure we have some kind of control and
transparency in the allocation of forex. Also, those who
continue to say the CBN is not allocating forex would
see the sectors it is going to and those purchasing it.
“So in line with what the CBN governor had said,
banks would only allocate forex to priority sectors,”
Muazu explained to THISDAY last night.
Instructively, the volume of demand for forex for
school fees was one of the main topics discussed at the
Bankers’ Committee yesterday.
The CBN, at the end of the meeting equally disclosed
that 57 million Nigerians, representing a third of the
population, now have access to financial services since it
commenced its financial inclusion campaign strategy.
It also said efforts were ongoing to increase the
numbers of access points for financial services in the
North-east.
Addressing journalists after the meeting in Abuja, CBN
Director, Banking Supervision, Mrs. Tokunbo
Martins, alongside other bank chief executives, said the
target was to improve financial inclusion to 68.5 per
cent.
Should the target be met, she said: “We would have
gone a long way to alleviate the sufferings of
Nigerians.”
Also, the CBN director confirmed that the central bank
was aware that some banks had imposed unapproved
charges on their customers.
She, however, explained that the affected banks had
been directed to reverse such deductions, adding that the
CBN would do everything to ensure bank charges do
not scare people away from the banking system.
The Group Managing Director/Chief Executive,
Access Bank Plc, Mr. Herbert Wigwe, also said the
committee discussed ways of ensuring that the demand
for foreign exchange for the purpose of paying school
fees abroad, among others, does not crowd out real
sector investments.
He said although the banks could not reach a definite
consensus on the issue, they harped on the need for
local patronage of things that have continued to exert
pressure on the naira.
He said discussions also centered on how to redirect
foreign exchange to the real sector, particularly
industries that utilise raw materials.
Wigwe added that discussions focused on cutting back
forex for the payment of school fees and re-channeling
same to the real sector.
He said: “We find different pressure on different banks
in terms of demand, but generally never below 15 per
cent of the demand of the current foreign exchange that
is being given to the banks is for school fees; that by any
stretch of imagination is significant.
“Now the deliberations we had today did not agree on
any final position but one thing was clear, which was
the fact that we should not allow this demand to crowd
out real sector investments, because the money you get
to pay these school fees is from industry that is working
locally.”
Wigwe added that the committee second also wondered
why the education system could not be revisited to make
children go to school locally.
“Why must we spend a lot of money around children’s
school fees overseas or medical tourism as they call it?
Now the idea is not that you can’t do it, it is that you
can’t access it from the central bank’s limited resources;
that’s the simple point.
“However, we did not reach any formal conclusion but
it is part of the general direction in which we are
headed,” he said.
In her contribution, the Managing Director/Chief
Executive, Standard Chartered Bank Nigeria, Mrs.
Bola Adesola, said the present situation required every
Nigerian to make sacrifices through local patronage to
further help the local currency.
Also, the Group Managing Director/Chief Executive,
Diamond Bank, Mr. Uzoma Dozie, said the
committee further sought ways to make documentation
on account operations in a cost-effective manner for the
benefit of both customers and the financial system.
He said the banks would also seek to drive financial
literacy so as to adequately educate customers about the
various bank charges, adding that most of the complaints
by customers showed they are not well informed. He
said banks had agreed to comply with approved charges.
On the impact of the publication of bank debtors, the
committee said the move had been helpful, stating that
the “list is getting better” by the day.
Meanwhile, the Edo State Governor, Mr. Adams
Oshiomhole yesterday threw his weight behind President
Muhammadu Buhari and the Central Bank of
Nigeria’s (CBN) stance against further devaluation of
the naira.
The governor, who spoke at colloquium organised by
online news medium, The Cable, on whether or not to
devalue the naira, argued that devaluing the nation’s
currency further would reduce workers’ wages and their
purchasing power.
He also stressed on the need for Nigerians, especially
the elite to cut their appetite for foreign goods.
According to the former Nigeria Labour Congress
(NLC) president, everything was perfect when crude oil
price sold for $140 per barrel, adding that at the time,
there was no conversation on whether the naira should
be devalued or not.
“If oil prices had gone to N200/$1, I suspect nobody
would be talking about devaluation. If we don’t cut our
demand for imports and reorder our consumption pattern
and our foreign exchange receipts continue to decline, all
things being equal, in the next one year, our foreign
exchange reserves would be zero.
“So I think it is the realisation of this danger that all of
a sudden everybody is discussing devaluation,” he added.
Oshiomhole recalled that the subject of the naira’s
devaluation in Nigeria was first triggered by the
International Monetary Fund (IMF) in the 1980s.
“Then, we were lectured about the beauty of
devaluation. We were even told the additional benefits
of how it was going to help redirect our consumption.
We were told by those experts that when you devalue,
a couple of things happen immediately: prices of
imported goods would go up and so when we will begin
to consume less of what is imported.
“These were some of good arguments around the issue
of the Structural Adjustment Programme (SAP)
introduced by the IMF. But at the end of the day,
we didn’t see those benefits.
“That is why I believe the issue of national economic
policy should not just be left in the hands of experts
alone,” he added.
He said: “The CBN, I understand, took some
measures which are beginning to hurt some people and
that has triggered this controversy. Rather than the
government, as it used to be in the past, indicating their
intention to devalue, it is a section of the public that is
behind this controversy: the investment bankers.
“These are the investment bankers who want to play on
bonds and other commercial papers with hot monies that
they can move in and out, they don’t want any
interference.”
He also opined that the present scarcity of dollars in
the foreign exchange market was not a supply issue,
saying, “We are dealing with pure speculative issues
and if you devalue, the main people who would be
trapped are the workers.”
He added: “Will devaluation curb our appetite for
imported goods as the IMF had argued in the 1980s?
The evidence from the CBN shows that policies in the
Nigerian environment cannot curb our appetite for
foreign goods.
“The last time the CBN devalued in 2014, as a matter
of fact, our exports actually declined and our imports
increased by 2.9 per cent after devaluation. When
humanbeings don’t labour to earn, they do not spend
rationally.
“Even if we devalue by 300 per cent, it would not curb
the appetite of the elite to import toothpicks and frozen
chicken, even if it is harmful, and will even import
expired rice from other countries.
“So the thesis that when you devalue you will export
more is not supported by evidence. The evidence we
have is that 98 per cent of our exports is in oil and gas
which is priced in dollars. So no matter what your
exchange rate is, this percentage will not change.
“On the other hand, when you devalue, will fewer
people travel? Again, the evidence is no. This is
because those who occupy permanently, the executive
seats of British Airways, they are the people who live
on rent. They are the subsidy boys, and they are the
political class. So, for me, I am not able to see what
the benefits of devaluation are.”
Oshiomhole noted that Buhari had said he would not
join forces with those who want to “kill” the naira.
“And when he uses the word ‘kill,’ he means it with
every sense in the world.
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