E-Financial
Move Towards Exchange Rate Unification Positive – Report
A report by the FSDH Research has described recent move by the Central Bank of Nigeria (CBN) to achieve exchange convergence is positive, saying it would ensure clarity and improve market confidence in the economy.
The report also stated that the move would enable Nigeria to unlock funding from several multilateral organisations such as the International Monetary Fund (IMF) and the World Bank and ease the pressure on the exchange rate in the medium term.
It further stated that the central bank’s current move towards unified exchange rate was expected to ensure flexibility and market- determined rate, which it stated to a large extent would, reduce arbitrage, round-tripping and could move the naira towards its fair value.
“The CBN’s move is expected to instill confidence in the market as foreign investors are more likely to participate in a less fragmented market that can be fairly predictable.
“Given this framework, the options available for the CBN include raising the interest rates to incentivise inflow of capital into the economy that may hurt economic recovery in subsequent quarters or relax capital control rules/restrictions and simultaneously increase market interventions to prevent significant depreciation of the naira that may result in external reserves depletion,” the report stated.
It, however urged the CBN to follow up the move to unify the exchange rate with a set of consistent forex policies that would seek to improve market liquidity and prevent every form of foreign exchange arbitrage and unnecessary subsidies.
It also urged the CBN to clear forex backlogs, which the IMF estimated to be $2 billion in February 2021, to further instill confidence in the market.
The report, which was titled: ‘Nigeria’s Foreign Exchange Policy Note- Navigating through the Tides of Uncertainty’.
It added that: “As much as Nigeria needs effective management of foreign exchange and unification of exchange rate to boost confidence, the supply shortage of foreign exchange is still a major problem.
“Increasing foreign exchange supply from non-CBN sources is vital in maintaining exchange rate stability in the I&E window and reducing speculative activities.”
The report predicted that the CBN would be faced with, “policy trilemma” to explain Nigeria’s foreign exchange and monetary choices.
The ‘trilemma’ refers to the trade-offs a government faces when making crucial monetary policy decisions because only two out of the three objectives could be achieved at a time.
It added: “With COVID-19, Nigeria maintained the two objectives of having a fixed/managed official exchange rate and monetary autonomy at the expense of free movement of capital. This was evident in the capital controls and forex backlogs.
“The recent move by the CBN to adopt the I&E market rate as the official rate will enable the CBN to control interest rate while capital controls can be relaxed, but exchange rate will have to be flexible.
“Whether the naira appreciates or depreciates will depend on the level of capital inflows and outflows, CBN’s involvement in the market and the external reserves position.
“This means only way to maintain a stable exchange rate is to attract even more capital into the economy or intervene heavily in the forex market using the external reserves.”
It added that the planned issuance of Eurobond by the government would provide some relief in the market and boost external reserves in the short term.
However, from the fiscal and trade perspective, “Nigeria will need to leverage on the African Continental Free Trade Area (AfCFTA) agreement to boost non-oil exports and increase foreign exchange inflows.”
The FSDH also recommended that, “providing direct incentives for businesses to produce for exports by implementing port reforms as well as developing a comprehensive industrial and trade strategies would be important steps that the government must take.
“Our 2021 forecasts for key indicators include real Gross Domestic Product (GDP) growth of 1.3 per cent, an average exchange rate of N430/$ and an inflation rate of 16.6 per cent.”
Value of eNaira, the digital currency of the Central Bank of Nigeria, CBN rose by 78.8 percent year-on-year (YoY) to N18.32 billion in the first ten months of 2024 (Q3’24) from N11.66 billion in the corresponding period of 2023.
Analysis of data from the Central Bank of Nigeria (CBN), Monthly Economic reports for the review period showed that the value of eNaira was stable in Q1’24 at N13.98 billion in 2024 from the previous quarter Q4’23.
The value grew by 31 percent YoY to N18.38 billion in Q2’24 but fell by 0.16 percent to N18.35 billion in Q3’24.
However, Month-on-Month, MoM, the value of eNaira fell by 0.16 percent to N18.32 billion in October.
Introduced by the Central Bank of Nigeria, CBN in October 2021 the eNaira is the digital form of the Naira and used just like the paper money (cash). The eNaira wallet is a digital storage that holds the eNaira. The eNaira wallet is required to access, hold and use eNaira.
According to the CBN, the eNaira was designed to deepen financial inclusion by bringing more people into the financial space, support a resilient payment ecosystem, reduce the cost of processing cash, enable welfare intervention to citizens, increase transparency in revenue and tax collections, facilitate Diaspora remittances, reduce the cost of financial transactions and improve the efficiency of payments.
Recently, the Governor of CBN, Olayemi Cardoso revealed the apex bank’s Payment System Vision 2025 disclosed that a comprehensive review of the eNaira implementation would be made to enable broad and positive economic impact.
Speaking at the 59th Annual Bankers Dinner of the Chartered Institute of Bankers of Nigeria, CIBN, Cardoso said, “To further enhance confidence in the payment system, our Payment System Vision 2025 initiative will drive initiatives to encourage quick and affordable cross border payment, a critical step toward unlocking trade , investment and economic growth. “Additionally, the eNaira, our CBDC, holds significant growth potential.
“We will therefore undertake a comprehensive review of its implementation to optimize broad and positive economic impact.”
Central Bank of Nigeria (CBN) has sanctioned nine deposit money banks (DMBs) for failing to ensure cash availability via automated teller machines (ATMs) during the festive season.
The banks have been fined a total of N1.35 billion for their non-compliance.
Each of the banks received a fine of N150 million.
The affected banks are Fidelity Bank, First Bank, Keystone Bank, Union Bank, and Globus Bank.
Others include Providus Bank, Zenith Bank, United Bank for Africa (UBA), and Sterling Bank.
A press release issued on Tuesday by Mrs Hakama Sidi Ali, acting director of Corporate Communications at the CBN, said, “In a clear message of zero tolerance for cash flow disruptions, the Central Bank of Nigeria has sanctioned Deposit Money Banks for failing to make Naira notes available through automated teller machines, during the yuletide season.
“Each bank was fined N150m for non-compliance, in line with the CBN’s cash distribution guidelines, following spot checks on their branches. The enforcement action follows repeated warnings from the CBN to financial institutions to guarantee seamless cash availability, particularly during periods of high demand.
“The affected banks include Fidelity Bank Plc, First Bank Plc, Keystone Bank Plc, Union Bank Plc, Globus Bank Plc, Providus Bank Plc, Zenith Bank Plc, United Bank for Africa Plc, and Sterling Bank Plc.”
Nova Bank has asked the Federal High Court in Lagos to wind up Sunrise Products Limited due to its alleged failure to pay back an outstanding debt of $2,587,891.21N276,567,150.63 allegedly owed to the bank.
The bank applied in a winding-up petition, claiming Sunrise Products Limited is bankrupt.
Despite repeated demands and the statutory three-week notice required under the Companies and Allied Matters Act (CAMA), the alleged debtor has failed to settle the outstanding debt.
The petition was filed before the Court on December 19, 2024, by Kemi Balogun (SAN), the bank’s lawyer, under case number FHC/L/CP/2357/24
In the petition, Nova Bank seeks the court’s permission to publish the winding-up notice in the Federal Government Official Gazette, a national daily newspaper, and other local publications distributed in Lagos State, where the company is registered.
The petitioner has also informed the court of a significant risk that Sunrise Products Limited may dissipate or dispose of its assets, potentially undermining any favourable judgment for the bank.
To address this concern, the bank filed a motion to protect the debtor’s assets by including the Central Securities Clearing System (CSCS) Plc and 21 other banks as respondents.
Therefore, the petitioner urges the court to order the Deputy Chief Registrar of the Federal High Court, Lagos, to be appointed provisional liquidator to oversee the company’s affairs until the winding-up order is granted.
The bank also asks the court for an interlocutory injunction to prevent the respondent, its directors, staff, and agents from withdrawing or tampering with the company’s funds in the listed banks.
The bank applied in a winding-up petition, claiming Sunrise Products Limited is bankrupt. Despite repeated demands and the statutory three-week notice required under the Companies and Allied Matters Act (CAMA), the alleged debtor has failed to settle the outstanding debt.
The petition was filed before the Court on December 19, 2024, by the bank’s lawyer, Kemi Balogun (SAN), under case number FHC/L/CP/2357/24
In the petition, Nova Bank seeks the court’s permission to publish the winding-up notice in the Federal Government Official Gazette, a national daily newspaper, and other local publications distributed in Lagos State, where the company is registered.
The petitioner has also informed the court of a significant risk that Sunrise Products Limited may dissipate or dispose of its assets, potentially undermining any favourable judgment for the bank.
To address this concern, the bank filed a motion to protect the debtor’s assets by including the Central Securities Clearing System (CSCS) Plc and 21 other banks as respondents.
Therefore, the petitioner urges the court to order the Deputy Chief Registrar of the Federal High Court, Lagos, to be appointed provisional liquidator to oversee the company’s affairs until the winding-up order is granted.
The bank also asks the court for an interlocutory injunction to prevent the respondent, its directors, staff, and agents from withdrawing or tampering with the company’s funds in the listed banks.
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