Banks, firms groan as forex scarcity affects payment obligations

Sources said that banks have been having long waits to access dollars from the Central Bank of Nigeria to meet their payments needs, such as foreign payments and Global Depository Receipts.

GDR is a means by which foreign investors invest in shares in other countries without trading in the stock exchange of the company’s home country.

Among entities experiencing forex challenges are banks that raised capital abroad and telecommunications and international oil companies that repatriate funds to their home countries to settle shareholders.

Moody’s Investors Service had stated in its July 2020 report titled ‘Renewed foreign-currency shortages highlight vulnerability for banks’ that Nigerian banks’ foreign currency funding gap would rise to $5bn over the current low oil prices, volatile foreign inflows and lower remittances amid coronavirus pandemic.

The CBN had resumed foreign exchange sales in April ending to commercial banks, to be made accessible to customers wishing to pay school fees, and businesses making essential imports needed to revamp economic activities across the country.

This followed its one-month forex sales suspension at the onset of the lockdown occasioned by dwindling forex from drop in oil revenue and the COVID-19 pandemic.

The continued ban placed on flights in the country by the Federal Government had further affected access to forex by Bureau de Change operators, but the regulator had said that forex would be extended to them when flights resumed.

Aminu Gwadabe, the president, Association of Bureau De Change Operators of Nigeria, said the suspension had caused speculation, volatility and spikes in the market.

A former President, Association of National Accountants of Nigeria, Dr Sam Nzekwe, worried that the forex constraint was more felt by private businesses and state governments as they needed to use more naira to get the dollars. Nzekwe noted that businesses that borrowed money in dollars and bought goods in foreign currencies would need more naira to pay back.

“So the people who will suffer the exchange rate is the individual, the states, local governments and companies because they will look for more naira to get dollars,” he said.

The naira, which officially exchanged to the dollar at N306/$ at the beginning of the year, was recently devalued to N379/$, while it sold at the parallel market for N475/$ on Monday.

The country’s foreign reserves depleted by $544.94m from $36.17bn on July 1 to $35.62bn on August 13, the latest figures from the CBN showed on Friday.

However, the President, Chartered Institute of Bankers of Nigeria, Mr Bayo Olugbemi, in an interview with our correspondent, said that the GDR and Foreign Direct Investments, among others, were some of the payments that got forex priority.

According to him, the GDR was a priority payment with the CBN and should not be affected by forex scarcity.

Forex scarcity, he added, could affect importation, especially when the government had restricted the list of goods that were qualified for forex.

He said, “When it comes to dividend payment on GDR on portfolio investors and FDI that were properly remitted to Nigeria, they are given priority.”

The CBN Governor, Mr Godwin Emefiele, recently said that investors interested in repatriating their funds from the country were guaranteed the safety of their money, notwithstanding the drop in the revenue from crude oil.

He noted that the CBN had put in place measures to ensure an orderly transfer of funds for those that might be interested in doing so.

However, the gap in fulfilling the pledge due to paucity of forex has had impact on the international operations of banks, telcos and IOCs.

In a related development, banks have continued to limit the spending limit on their international payment cards as foreign exchange scarcity worsened in the country.

First Bank on Monday said it had limited the international spending limit on its naira MasterCard to $100.

In an SMS to its depositors, the bank stated, “The monthly international spend limit on your FirstBank Naira MasterCard is now $100.

“For higher limits, get a FirstBank Visa Gold card today.”

Recently, Fidelity Bank also disclosed that it had reviewed its card spending limit.