Which Bank will gain the most from CBN FX moves?

Lenders finally get a break and a chance to boost earnings with CBN move

Measures announced on 20 February by the Central Bank of Nigeria (CBN) will ease some of the severe foreign currency liquidity pressure faced by the country’s banks, Fitch Ratings said in a note last week.
The most important aspect of the CBN’s announcement is a plan to normalise the FX interbank market, in Fitch’s view.
The CBN’s intention is to clear the backlog of overdue foreign currency obligations owed by banks to international creditors which are primarily trade finance obligations owed to correspondent banks.
In addition, the CBN will no longer have a say in how banks on-lend the foreign currency they access from it.
Banks previously had to demonstrate that funds were being directed to priority sectors of the economy.
The CBN says that providing foreign currency to the manufacturing sector is still a priority, but with restrictions eased, larger banks with greater access to foreign currency will be free to lend to the smaller banks whose access to international funding is restricted.
The CBN has also reduced the maximum waiting times for banks to take delivery of foreign currency through its forward sales contracts to 60 days from 180.
Fitch said this should help banks make more timely payments to creditors, speeding up the flow of currency to importers and helping the economy, according to Fitch.
According to Fitch the CBN’s initiatives are an important boost for banks as access to foreign currency liquidity is tight and banks have struggled to meet their foreign currency obligations. Nigeria is highly dependent on imports and Nigerian banks have long provided trade finance facilities to importers.
Currency scarcity and exchange rate weakness have made it harder for importers reliant on naira-denominated cash flows to service US dollar-denominated trade finance lines, forcing some banks to restructure their obligations with international correspondent banks last year.
Correspondent creditor banks also agreed to maturity extensions and were duly compensated for this.
So which banks are most likely to benefit from relaxed FX trading rules and more availability of FX?
The first clue for us would be banks that are fairly liquid and net placers of naira on the interbank market.
Last Friday the Nigerian Interbank offer rate (NIBOR), spiked to 117 percent as banks were debited for dollar purchases made during the CBN special FX intervention.
Overnight placement traded at around 200 percent during early trade but dropped at market close, said the traders.
This is an indication of the tight Naira liquidity in the system and bigger banks would have the advantage here.
The CBN said banks could resell dollars supplied them at a margin of not more than 20 percent above the interbank rate of 305 naira per dollar.
This again is a chance for banks to book solid FX gains.
Looking at banks 3rd quarter 2016 results, FBN Holdings, Guaranty Trust Bank (GTB), FCMB, Diamond Bank and Zenith Bank all had significant jumps in Foreign Exchange gains as at the third quarter of 2016, compared to a year earlier.
We believe this trend is set to continue!

Comments

Post a Comment

DISCLAIMER : Opinions expressed in comments are those of the comment writers alone and does not reflect or represent the views of Hitgist.com.ng ...

Popular posts from this blog

SAD:- I usually steal N50 to buy food, boy beaten to death by father told neighbour

Image
T he 10-year-old Adekoya Wariz, who was beaten to death by his father in Ijebu-Igbo area of Ogun State, once told a neighbour, Baba Olaolu, that he usually stole N50 from his step-mother’s handbag because he needed it to buy gari and groundnut, as he was always denied food. According to Olaolu, Wariz’s step-mother would tell his father that the money Wariz stole was N200 or more, resulting in constant beating, without getting a chance to tell his side of the story. Meanwhile, Wariz’s 37-year-old father, Rasaq Adekoya, has expressed regret, saying his intention was not to kill him. Adekoya, a Muslim cleric, told detectives at the homicide section of the Ogun State Criminal Investigations and Intelligence Department, CIID, Eleweran, Abeokuta, that his son, Wariz, slumped while he was beating him, over an allegation that he stole a phone at a social function. The Deceased He also accused his late son of always stealing his step-mother’s money. Vanguard gathered th...
Read more

Ubi Franklin, Lilian Esoro Estranged couple reunited? Ubi Franklin and Lilian Esoro attended a charity event together in Abuja and you know what that could mean.

Image
Don't we all love happy endings?  At long last,  Ubi Franklin  and his   estranged wife,  Lilian Esoro , maybe letting bygones be bygones. Months after their marriage crashed and it seemed like all hope was lost, the pair were pictured together at a charity event in Abuja. play Is Lilian Esoro and Ubi Franklin's marriage over?  (Instagram) Even better is the cozy picture they presented, with Lilian rocking a MMMG face cap. Franklin was also pictured walking the runway with their son,  Jayden , at the event. Of course, their fans are elated at the prospect of a reunion between the pair, although we never knew the reason for their estrangement in the first place. Many were quick to note how they handle their issues maturely, keeping the dirty details to themselves, while others were quick to hope  Tonto Dikeh   would learn a thing or two from them . play 3 things about the 'Lilian Esoro - Ubi Franklin' divorce...
Read more

All You Need to know about Samsung Galaxy Note 7 recall (MUST SEE)

Image
Samsung has announced a recall of Note 7s along with a halting of sales after concerns of faulty components causing battery explosions.  Here’s what you need to know about the recall and how to handle it with your own Note 7. This is a constantly evolving story with information that is being updated regularly. Should you keep using your Note 7? You need to understand that even though Samsung is recalling every phone it has sold, that doesn’t mean that every phone is at risk of having a battery failure. From Samsung’s announcement of the recall, there have been 35 cases of the issue, out of over a million phones sold but that doesn’t mean your phone has the same problem. Samsung isn’t saying one way or the other what current Note 7 owners should do. Depending on where you bought your Note 7 from, you may have to wait a while to get a fresh one. What’s causing phones to be recalled? Samsung’s official statement on the recall says that the i...
Read more