Business

Experts Disagree Over CBN New Forex Policy

Published

2 years ago

June 15, 2023

Experts have differed on the recent liberalisation of the foreign exchange (forex) market by the Central Bank of Nigeria (CBN).

The CBN had two days ago announced measures to liberalise the market including the elimination of multiple exchange rates, and freedom for banks to buy and sell foreign exchange at any rate based on a willing buyer and willing seller arrangement.

Reacting to this development Dr Muda Yusuf, Chief Executive Officer, the Centre for the Promotion of Private Enterprise (CPPE), said that the liberalization of the foreign exchange (forex) market would unlock huge potential for investment and boost government revenue by N4 trillion through additional remittance of exchange rate surplus to the federation account by CBN.

But in his reaction, Taiwo Oyedele, Africa Tax Leader, PricewaterhouseCoopers PwC, slidely disagreed, saying though the development is a positive one that can lead to improvement in the sovereign rating of the country, it will lead to rise in government debt and cost of servicing the debt.

Dr Yusuf said on the CBN policy: “The liberalization of the foreign exchange (forex) market would unlock the huge potentials for investment, jobs and capital flows. Investors’ confidence would be positively impacted.

“Meanwhile, it should be clarified that this is not a devaluation policy, but a pricing mechanism that reflects the demand and supply fundamentals in the forex market.

“It is a framework which allows for flexible rate adjustments as and when necessary. It is a model that is predictable, equitable, transparent and sustainable. It is a policy regime that would reduce uncertainty and inspire the confidence of investors. It would minimize discretion and arbitrage in the forex allocation mechanism.

“Rate unification does not imply that rates will be exactly the same in all segments of the market. The objective is to ensure that the differentials are very minimal, possibly between 5-10%.

“A unified exchange rate regime offers the following benefits for the economy: It enhances liquidity in the forex market; reduces uncertainty in the market and therefore enhances the confidence of investors; more transparent as a mechanism for forex allocation; minimizes discretion in the allocation of forex and reduces corruption vulnerabilities; and reduces opportunities for round tripping and other sharp practices.”

Other benefits he listed are: “It would increase disclosures with respect to export proceeds and compliance with non-oil export declarations, especially the non-oil export documentation; boost government revenue by a minimum of N4 trillion through additional remittance of exchange rate surplus to the federation account by CBN; use of naira cards for limited international transactions would be restored in the short to medium term; would facilitate the mopping up of naira liquidity in the economy in the short to medium term. This would impact positively on inflation outlook; and deepen the autonomous forex market through the liberalization of inflows from Export Proceeds, Diaspora Remittances, Multinational oil companies, diplomatic missions etc.

“In the short term, we expect a depreciation of the currency in the official window because of the huge demand backlog. But as the market conditions normalize and move towards equilibrium, the rate would moderate. We also expect the new policy regime to boost inflows and strengthen the supply side amidst elevated investors’ confidence. The component of forex demand driven by arbitrage, rent seekers, speculators and other economic parasites would also fizzle out, thus restoring stability to the forex market.

“However, CBN should position itself for periodic intervention in the forex market, as and when necessary, to stabilize the exchange rate and prevent volatility. This should happen not by fixing rate, but by boosting supply to the extent that the reserves can support.”

But Oyedele reacted: “The major impacts will include: a significant rise in government debt in naira terms by about N12 trillion to N90 trillion i.e. external debt of $42 billion will increase by the difference between the old and new rates.

“As a result of the above, the debt to GDP ratio will increase by about 5%, There will be a corresponding increase in debt service cost with respect to foreign debt service.

“Government’s revenue will increase in naira terms resulting in a higher tax/revenue to GDP ratio. Corporate tax collection may however decline as many businesses crystallise forex losses due to the higher exchange rate.

“Possible reduction in budget deficit if government’s forex revenue exceeds foreign currency obligations, an increase in budget deficit will arise if otherwise”.

Oyedele however sounded a note of caution, saying: “Government needs to manage the dynamics to restore confidence. The backlog of forex demands needs to be addressed and the government should be ready to supply forex to stabilise the exchange rate in the short term.

“Also relax capital control and administrative bottlenecks including unbanning the list of items prohibited for FX (and complement with higher import duties), remove the need for a certificate of capital importation etc to prevent the parallel market rate from simply moving further away from the official market rate.

“The aggregate demand for FX across markets should reduce as round-tripping incentives are removed, for instance people who fake foreign travels just to get FX at discounted rates. “Also, Nigeria’s sovereign credit rating should improve if this is complemented with the right fiscal and monetary policies thereby attracting more FX inflows and lowering the cost of borrowing.”

Business

First Bank: Controversy Trails Multi-billion Naira Shares Deal

Published

3 days ago

July 18, 2025

Editor

There seems to be uncertainty around the share sales and purchase deal between Oba Otudeko, Hassan Odukale on one hand and Femi Otedola on the other in First HoldCo, the parent company of First Bank.

The deal delivered an unprecedented quantum of the financial group’s shares to Otedola, the current Group Chairman of First Holdco, from the shareholdings of Odukale and Otudeko, the two immediate past chairmen of the group.

Also the deal ramped up Otedola’s holdings in the Group to an unprecedented level of 40%, the largest in the history of the bank and also largest single shareholdings amongst the tier-1 banks in Nigeria.

However, when Vanguard contacted the Nigerian Exchange Limited, the Spokesperson, Clifford Akpolo, said: ”I am not aware of these transactions as the NGX Reg has not notified the NGX.”

The NGX trading rules required that a sale or purchase of shares up to 5% must be notified to the NGX Reg. The deal covered about 25% of the bank’s total shareholding.

Similarly, First Bank’ s spokesperson, Mr. Ismail Omamegbe, did not respond to a text message sent to him, nor responded to calls in respect of the deal.

But sources in the bank indicated that the deal was executed off-trading floor and in connection with the long-drawn battle between the current board of the bank group and the two former board chairs who opted to surrender their shares for the bank to drop legal proceedings against them.

The deal, executed through 17 negotiated trades at ?31 per share, involved the transfer of 10.43 billion units of FBN Holdings shares and is estimated to be worth over ?324 billion.

The acquisition, confirmed by trading data and capital market sources, marks a turning point in the ownership structure of one of Nigeria’s oldest and most prominent financial institutions.

The buyer in all 17 deals was First Securities Ltd, while the sellers included CardinalStone Securities, Meristem Stockbrokers, Renaissance Capital, Regency Asset Management, Stanbic IBTC Stockbrokers, United Capital Securities, and First Securities Ltd (acting as both buyer and seller in select trades).
(VANGUARD)

Business

South-South Contributed Over 21% Nigeria’s GDP In 2024 – Banker’s institute

Published

3 days ago

July 17, 2025

Editor

The President of the Chartered Institute of Bankers of Nigeria, Prof. Pius Olanrewaju, has stated that the South-South region contributed N34 trillion to the country’s economy in 2024.

He made the remark at the South-South Zonal Banking and Finance Conference in Calabar on Thursday.

He spoke on the theme, ‘Building An Inclusive South-South: Economic Diversification as a Catalyst For Development.’

Olanrewaju, who quoted the data from the Cable Data Index, said the feat was more than 21 per cent of Nigeria’s real Gross Domestic Product.

The president described the growth as “impressive,” saying that it was not driven by oil alone but significant expansions in trade, services, and the creative industries.

According to him, to fully harness this potential, coordinated financial, technological, and policy support is essential.

“As we work to reposition the South-South for broad-based prosperity, the financial system must play a central role, not merely as a source of capital, but as a catalyst for innovation, ideas incubation, and inclusive economic growth.

“This conference, therefore, provides a strategic opportunity for stakeholders to reimagine the South-South economy, not merely as a resource belt, but as a region of diverse capabilities and resilient enterprises,” he said.

Olanrewaju added that Nigeria must move beyond old models and chart a new course for the development of the South-South region, where financial institutions and stakeholders collaborate to diversify the economy for shared prosperity.

He, however, commended Governor Bassey Otu for his pledge of land for CIBN Secretariat in Cross River and being the first sitting governor to willingly undergo and complete the Chartered Bankers Programme.

On his part, Otu said that the conference discussion on the economic diversification in the South-South region was timely against the backdrop of global trade and economic volatility that was affecting the nation’s economy.

Represented by his deputy, Mr Peter Odey, Otu said the South-South region must now act with urgency to diversify its economy while leveraging its shared natural endowment in agriculture and extractive resources.

“This conference must help develop tailored financial solutions that reflect the unique strengths and realities of states like Cross River in the south-south.

“Diversification should be evidence-based and must be backed not just by financial advice but project-focused financing and real investment support,” he stated.

He said that Cross River had taken the bold step to invest in its agricultural sector by launching an agro-processing hub.

Otu further said that the state had invested in aviation by acquiring more aircraft for Cally Air, constructing the Bakassi Deep Seaport and injecting N18 billion in its tourism sector.

Similarly, the Cross River Branch Controller of the Central Bank of Nigeria, Mr Tolefe Jibunoh, said that the region was blessed with natural resources, cultural diversity and immense human potential.

Jibunoh, who was represented by Head, Currency Control Office, CBN, Calabar, Mr Segun Shittu, noted that strategic diversification could unlock unprecedented opportunities for growth in the region.

He added that the CBN remained steadfast in maintaining monetary possibilities and promoting a sound financial system as a catalyst for sustainable economic development for the benefit of all.

NAN

Business

Naira Rises In Parallel Market

Published

6 days ago

July 15, 2025

Editor

The naira today appreciated to N1,545 per dollar in the parallel market from N1,550 per dollar last weekend.
Likewise, the Naira appreciated to N1,528.65 per dollar in the Nigerian Foreign Exchange Market (NFEM).

Data published by the Central Bank of Nigeria, CBN, showed that the exchange rate for the naira fell to N1,528.65 per dollar from N1,532 per dollar last week Friday, indicating N3.35 appreciation for the naira.

Consequently, the margin between the parallel market and NFEM rate narrowed to N16.35 per dollar from N18 per dollar last weekend.