Economy

FX market harmonisation: Naira depreciates by 215% in one year

Published

7 months ago

June 17, 2024

Since the harmonisation of the foreign currency market segments in Nigeria one year ago, the naira has depreciated by about 214.64 per cent against the dollar.

At the close of trade on Friday, the naira stood at N1482.72 to a dollar, compared to the N471/$ it was a year before.

The statement from the CBN abolishing the segmentation of the FX market into different windows partly read, “All transactions will now be done through the Investors and Exporters window, where the exchange rate will be determined by market forces. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.”

The CBN also announced reintroducing the ‘willing buyer, willing seller’ model at the I&E window, which allows eligible transactions to access foreign exchange based on the guidelines outlined in the circular dated April 21, 2017.

Since the floating of the Nigerian currency, it has remained unstable despite spirited efforts by the CBN under Dr Olayemi Cardoso to stabilise it.

At the end of 2023, the naira closed at 911/$, signalling a significant drop in six months.

In a commentary in February, Fitch Ratings put the drop in the value of the naira at about 40 per cent, saying, “The Nigerian naira was recently devalued sharply (end-2023: 899/USD; 13 February: 1,516/USD; about 40 per cent devaluation), exceeding our expectations of a more moderate depreciation in 2024. The large devaluation is the second within a year (70 per cent devaluation since end-2022) and has converged the official exchange rate with the parallel market rate.”

In the New Year, the local currency recorded high volatility, depreciating to almost 2,000/$, which raised claims that activities on peer-to-peer trading platforms were impacting the value of the naira.

The currency also went from being the top-performing currency in March to the worst-performing currency in the world in April, according to a Bloomberg report.

Amid all of this, the CBN has issued draft circulars and taken steps to stabilise the naira and boost forex supply.

Commenting on the status of the naira, one year after the major reform, economist and the Chief Executive Officer of Economic Associates, Ayo Teriba, applauded the Olayemi Cardoso-led CBN for its handling of the fallouts of the FX market harmonisation.

He said that compared to the fuel subsidy removal bit, the FX market had done better.

“I will say that the naira has done better than the pump price of the petroleum product. They were both policies hurriedly embarked upon without adequate preparation. But in the case of the foreign exchange market, the necessary reforms have been done post-liberalisation and you have to commend the central bank governor and his team.

“He (Cardoso) was appointed three months after the harmonisation. He has tried to resolve the issue of lack of transparency in the market. There is more transparency and he has been very forthright about the arrears that he had inherited at the time, very open about how much they were repaying until they repaid everything, and the portion of it that was fraudulent.

“He has also opened the market to foster more inclusiveness. You have to applaud the current regime; they have abolished the ban on the 43 items, admitted Bureau De Change operators, and licensed International Money Transfer operators. Everyone deserves a seat at the table and it is not surprising that the rates have converged.”

Teriba, however, expressed concern about the persistent volatility in the market but expressed optimism that the CBN and the monetary policy committee would be able to get a handle on it.

“The only persistent concern with the FX is the volatility, which the central bank and the monetary policy committee are trying their best to deal with and will eventually be able to deal with. You cannot say that with the fuel subsidy removal reform,” he asserted.

A former Chief Economist for Zenith Bank, Marcel Okeke, described the floating of the naira as a calamity.

“It is one of the wrong policy initiatives of the government, especially coming so close to the removal of the fuel subsidy. The impact of the two policies has brought the economy to where we are today where we cannot see any light at the end of the tunnel.

“Floating the naira in June 2023 was like putting the naira in a wrestling ring with other currencies of the world like dollars, Pounds Sterling and others, it lost value and strength so much that it was almost on a tailspin,” he posited.

A Relationship Manager Of Corporate Banking at FSDH Merchant Bank Limited, Ayodele Akinwunmi, stated that some of the objectives of the reform had been achieved, which included the convergence of the segments of the market.

“The gap between the official and parallel market rates is now very narrow if not almost the same, so there is no roundtripping from one segment of the market to the other, which was one of the objectives.

“Also, there has been improved confidence from foreign investors in bringing money to the country. They have invested a lot in fixed-income securities and they have also tested the market to see whether they can exit the market after making a profit, and yes, they have been able to do that successfully.

“So, they have the confidence that if they bring in their money into the country, they are able to exit when they want to, which was one of the objectives of the reform,” he stated.

According to Akinwumi, it is to increase supply in the forex market.

“We need as a nation to grow our economy, to enable us to export more, not only for oil but also from non-oil sectors. We have solid minerals, agriculture, and manufacturing products, and we can add more value to the agricultural produce than the raw materials that we sell today. We need to make the economy more competitive, and security in the nation must improve, so that we do not import the things we can produce locally.

“With Dangote promising to supply PMS from next month, that means the import bill for petrol will drop significantly and if we can supply crude significantly, which I don’t think we should be able to,” he noted.

He stated that the project could meet local demand and even supply the West African market and some parts of Europe.

“He has been supplying fertilizer to America, Brazil, the Caribbean and parts of Europe and when you supply such, you are bringing in foreign exchange. What do we need to optimise the plant? Gas, which we have in abundance, is being flared. Whatever the government needs to do to make that project work, they need to do it,” he explained.

Meanwhile, the Economist Intelligence Unit has projected a stronger dollar this year and 2025, which may add to naira woes.

In its latest report titled ‘A stronger dollar for longer, predicting the effects on emerging markets’ the EIU said, “The dollar’s dominant role in international trade and finance prompts us to ask, how long can the global economy withstand above-average strength in the US dollar?

“In terms of financial crisis risk, emerging markets are more vulnerable, owing to a frequent dependence on external funding in major global reserve currencies–most often the US dollar–to finance public expenditure and plug shortfalls in the balance of payments. A stronger US dollar raises the local currency burden of repayments, compounding the impact of higher rates on the cost of borrowing.

“Moreover, these effects often play out against a backdrop of private sectors that are squeezed by tighter financing conditions; domestic central banks are obliged to keep local rates high amid tight US policy, and foreign investment is instead directed towards developed markets with higher returns. These trends serve to further undermine economic growth and government tax revenues.”

Economy

Nigeria secures aircraft financing deal with Afreximbank

Published

3 days ago

January 16, 2025

Naijablitznews

By Francesca Hangeior

A development financing institution, African Export–Import Bank, Afreximbank, has agreed in principle to collaborate with Nigeria on aircraft financing.

Afreximbank, while announcing plans to launch a leasing subsidiary, which will soon take delivery of 25 aircraft to be leased to African airlines, said it will provide Nigerian airlines with access to dry-leased aircraft that would enable them to better service Bilateral Air Service Agreement, BASA, routes and domestic operations.

A statement by Mr Tunde Moshood, special adviser on Media and Communications to the Minister of Aviation and Aerospace Development, Mr Festus Keyamo, said the partnership was achieved during a side meeting held with the Afreximbank team at the four-day Aviation Economic Conference in Dublin, Republic of Ireland.

The statement reads: “A significant milestone in Nigeria’s aviation sector was achieved during a side meeting held with the Afreximbank team at the ongoing Aviation Economic Conference in Dublin, Republic of Ireland. The meeting, facilitated by Boeing’s Senior Director of Finance, Lereece Rose, brought together key stakeholders to discuss aircraft financing opportunities for Nigerian airlines.

“The meeting was attended by the Minister of Aviation and Aerospace Development, Festus Keyamo SAN, who led the Nigerian delegation. The delegation included distinguished members such as the Chairman, Senate Committee on Aviation, Senator Abdulfatai Buhari; Chairman, House Committee on Aviation, Abdullahi Idris Garba, Chairman, Senate Committee on Banking, Insurance, and Other Financial Institutions, Senator Abiru Adetokunbo; Director General of the NCAA, Capt. Chris Najomo; Managing Director of Fidelity Bank, Dr. Nneka Onyeali-Ikpe; COO of Air Peace, Toyin Olajide; CEO of XEJet, Emmanuel Iza; Chairman, ValueJet, Kunle Soname and his Managing Director, Capt. Majekodunmi, and Chairman/CEO of Bellagio Air, Dr. Oludare Akande, among other aviation stakeholders.

“At the meeting, Afreximbank, led by its Director and Global Head of Project and Asset-Based Finance, Helen Brume, agreed in principle to collaborate with Nigeria on aircraft financing. Highlighting the bank’s extensive experience in supporting airlines such as Arik Air, Kenya Airways, and TAG over the past two decades, Brume emphasized the need for robust aviation infrastructure to enhance the competitiveness of African airlines.

“To address this, Afreximbank announced plans to launch a leasing subsidiary, which will soon take delivery of 25 aircraft to be leased to African airlines. This initiative aims to provide Nigerian airlines with access to dry-leased aircraft, enabling them to better service Bilateral Air Service Agreement, BASA, routes and domestic operations.

“Lereece Rose commended the Minister for his efforts in improving Nigeria’s aviation ecosystem, particularly in raising Nigeria’s Cape Town Convention score from 49.5% to 75.5 per cent. This progress underscores the country’s commitment to creating an enabling environment for aircraft financing and leasing.

“The Minister highlighted the critical need for partnerships that would enhance access to aircraft financing for Nigerian operators, facilitating growth and improved service delivery. In response, Afreximbank affirmed its readiness to work with the Nigerian government, signaling a promising future for the country’s aviation industry.

“A committee has been established to follow up on the discussions, ensuring that this partnership materializes into actionable solutions for Nigerian airlines.”

Economy

SEE Dollar (USD) to Naira Black Market Rate Today January 16, 2025 Aboki

Published

3 days ago

January 16, 2025

Naijablitznews

As of January 16, 2025, the Nigerian Naira (NGN) has continued to experience some level of volatility against the US Dollar (USD), while this has been the norm for decades now, this largely to some extent reflects the ongoing economic challenges.

See the Naira performance across various currencies

A quick check at the parallel market at Abuja Zone 4 market,as at January 16, 2025 , the black market exchange rate stands firmly at approximately ₦ 1,663.00 per USD. This means if you want to buy a dollar now, it is ₦ 1,663.00 while if you want to sell it is approximately ₦ 1,652.00 .

Please be aware that the parallel market or the black market rates are mostly and notably higher compared with what you get from the official market or CBN rate

Dollar to Naira (USD to NGN) Black Market Exchange Rate Today

Selling Rate ₦ 1,663.00

Buying Rate ₦ 1,652.00

Economy

Providus Bank Battles E-Settlement Company To Salvage N3.7 Billion Loan

Published

3 days ago

January 16, 2025

Kayode Sanni-Arewa

In a bid to salvage the sum of three billion, seven hundred and forty-three million, one hundred fifty-two thousand, five hundred and nine eighty Naira which was advanced to E- Settlement company, Providus Bank Limited has applied to a federal high court in Lagos urging the court to set aside an order granted the company to convene a meeting of its creditors to pass a scheme of arrangement.

In an affidavit sworn to by the Head, Loan Recovery & Remedial Management of Providus Bank Limited,Olayinka Lawuyi, he avers thus:

Providus Bank is one of the creditors of the E-Settlement Limited with the sum of N3,743,152,598.57 (three billion, seven hundred and forty-three million, one hundred and fifty-two thousand, five hundred and ninety-eight Naira, fifty-seven Kobo)being owed to it by E-Settlement Limited.

The bank provided E-Settlement Limited with an overdraft facility to the tune of N2,600,000,000 (Two Billion and Six hundred Million Naira only) upon its application to enable E-Settlement Limited to rebook its loan balance in order to enable it to repay from its current cash flow realities.

The said facility was due for repayment on 3rd January 2025, as the agreed tenor for the overdraft facility was 365 days.

Further to the paragraphs above, PROVIDUS bank and E-Settlement Limited had already taken steps towards an agreement/compromise with respect to the loan facility, and it is a shock to the bank that while negotiating the terms of a loan restructuring privately with the bank E-Settlement Limited has taken steps to hold a court-ordered meeting of all its creditors.

E-Settlement Limited approached the Court vide an Ex Parte application dated 23rd October 2024, seeking, amongst other things, an order mandating all the creditors of E-Settlement Limited to attend a meeting for the purpose of the E-Settlement Limited, proposing a Scheme of Arrangement and Compromise to all its creditors under Section 715 of the Companies and Allied Matters.

In E-Settlement Limited’s application to the Court, E-Settlement Limited indicated that it is indebted to its creditors in the sum of N12,458,553,150 (twelve billion, four hundred and fifty-eight million, five hundred and fifty-three thousand, one hundred and fifty Naira).

By E-Settlement Limited’s Scheme of Arrangement, it wishes to defray its entire alleged N12, 458,553,150 (twelve billion, four hundred and fifty-eight million, five hundred and fifty-three thousand, one hundred and fifty Naira) with the sum of $2,000,000.00 (Two Million US Dollars), which is to be full and final payment of its alleged indebtedness to all its creditors on a pro-rata basis. E-Settlement Limited stated in its application that it is indebted to the following creditors in the following amount.

Bank of Industry: N452,326,928
Kunoch Limited: N849,896,553
Vale Blue Finance Limited: N309,400,140
VFD Microfinance Bank Limited: N30,000,000
Kuda Microfinance Bank Limited: N1,510,193,217
PROVIDUS BANK Plc: N3,795,837,670
Emirates and Highbury Limited: N4,590,065,330
Advanced Technologies Nigeria Limited: N425,072,322,9
Aza Finance: N8,870,666
Kizento Project: N170,831,000
Salaries: N324,950,000

TOTAL, N12,467,443,826

E-Settlement Limited purposefully and intentionally misrepresented and suppressed several material facts before the Court, which ought to have been openly provided to enable the Court to reach an informed decision on the application.

Mr Lawuyi avers further that as a fact that E-Settlement Limited misrepresented and suppressed material facts from the Court in obtaining the orders:

The fact that E-Settlement Limited is negotiating privately with the Providus bank on a restructuring of its loan obligations E-Settlement Limited concealed the fact that of the 11 Creditors listed in the Scheme of Arrangement, at least 3 (Three) of the said Creditors have the same/similar Directors and are controlled by the same proprietors as E-Settlement Limited herein.

As a fact E-Settlement Limited and its alleged creditors have already arrogated to themselves 49.6% out of the 80% required by Section 715(1) to pass the Scheme of Arrangement.

The Scheme of Arrangement currently proposed by E-Settlement Limited is inherently unfair to PROVIDUS Bank

As a fact E-Settlement Limited commenced the application in Suit No: FHC/L/MISC/709/2024, vide an Ex Parte Originating Summons to obtain the order therein, without the Court hearing PROVIDUS BANK or any of the other creditors on the propriety of granting the said orders.

Further to the statement above, E-Settlement Limited obtained Court orders affecting the rights and interests in the loan facility extended to it without the Court first hearing PROVIDUS bank or giving it an opportunity to be heard, a breach of it’s right to fair hearing.

E-Settlement Limited misrepresented to the Court the true and actual position of its indebtedness.

The prayers sought in this application are to protect the rights and interests of PROVIDUS Bank the party, affected by the order.

Consequently, It is in the interest of justice to grant this application. E-Settlement Limited will not be prejudiced by the grant of this application. The court has adjourned for the hearing of the application.