How CBN Fx Reforms is Boosting Investor Confidence – Experts

Experts in Nigeria’s financial sector said the recent floating of the forex exchange by the Central Bank will boost investor confidence adding that challenges with the supply side of the forex will only linger in the short term. In an interview with Daily Trust, noted that the move to float the naira may hurt the […]

Experts in Nigeria’s financial sector said the recent floating of the forex exchange by the Central Bank will boost investor confidence adding that challenges with the supply side of the forex will only linger in the short term.

In an interview with Daily Trust, noted that the move to float the naira may hurt the economy in the interim, they however express optimism that the it will boost economy and improve investor confidence.

Recall that in June 2023, the Central Bank of Nigeria released new operational changes to the foreign exchange market in the country.

The new operational changes abolished all segments of the foreign market and collapsed them into the Investors and Exporters (I&E) window.

The guideline signed by the Director, Financial Markets, Angela Sere-Ejembit said that applications for medicals, school fees, BA/PTA, and SMEs would continue to be processed through deposit money banks.

In the new changes, the CBN reintroduced the “Willing Buyer, Willing Seller” model at the I&E Window.

The statement read “The Central Bank of Nigeria (CBN) wishes to inform all authorized dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange (FX) Market.

“All segments are now collapsed into the Investors and Exporters (1&E) window. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.

Operations in this window shall be guided by the extant circular on the establishment of the window, dated 21 April 2017 and referenced FMD/DIR/CIR/GEN/O8/007. All eligible transactions are permitted to access foreign exchange at this window.”

“The operational rate for all government-related transactions shall be the weighted average rate of the preceding day’s executed transactions at the 1&E window, calculated to two (2) decimal places. Proscription of trading limits on oversold FX positions with permission to hedge short positions with OTC futures. Limits on overbought positions shall be zero,” the CBN had disclosed

Speaking on the issue, Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, described the reforms as welcome developments, adding that their outcome may delay but Nigerians will reap the fruits in the medium and long term.

He said, “In the long run, however, these reforms are expected to derive positive outcomes. Currently, we are experiencing traction in the investor confidence already manifesting in the capital market and other markets.

“We, however, need to take insecurity very seriously in order to get optimum investment benefits from these reforms.”

However, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade, said the reforms have started yielding positive results already.

He said, “We have started seeing positive signs in the economy especially the Capital market where investors’ confidence has been rekindled.

“The I & E window has also recorded significant FX transactions since the new FX policy started.  The Importers & Exporters window exchange rate is also gradually converging with the black market rate which is also a very positive sign.”

He added that “Economic experts have also asserted that the CBN is going in the right direction as regards its recent policies.

“We will wait for the outcome of the next MPC meeting as regards what the new position on interest rates.”

In the same vein, development expert, Ibrahim Shelleng expressed confidence that the new policy by the CBN will improve growth in the economy as investors are always on the look for such policy directions.

He added that investors were only awaiting the outcomes of a number of key policy directives on monetary and fiscal policy.

He however noted that rates would eventually stabilise and lead to greater FDI

He said, “I think the move to unify the FX rate was a no-brainer. The markets have reacted positively and it is a sign of things to come. The stock market has rallied to a 15-year high and the valuation of banking stocks is set to improve as well.

Also, the initial spike in rate is to be expected due to a backlog of demand and Hajj demand as well. Rates will eventually stabilise and lead to greater FDI.”

Asides floating the naira, the CBN under the acting governor  Folashodun Shonubi, also suspended  the RT200 Rebate and Naira4Dollar Remittance Schemes, with effect from June 30.

Both initiatives, introduced by the suspended CBN Governor, Mr. Godwin Emefiele, were launched to boost non-oil exports and diaspora remittances to encourage foreign exchange inflows into the economy.

These initiatives had been highly commended and welcomed by analysts with early positive results since they were launched.

The initiatives in the FX market also led to the devaluation of the naira as the local currency became weaker against the US dollar.

The apex bank had explained that the policy changes introduced in the country’s foreign exchange market were meant to promote transparency, liquidity and price discovery in the FX market in order to improve supply, discourage speculation, enhance customer confidence as well as ensure overall stability in the FX market.

The CBN also announced that going forward domiciliary account holders are permitted to utilise cash deposits not exceeding $10,000 per day or its equivalent via telegraphic transfer.  CBN Director, Corporate Communications, Department, Dr. Isa Abdulmumin, in a statement issued after an extraordinary Bankers’ Committee meeting also said all visible and invisible transactions including medicals, school fees, BTA/PTA, airline and other remittances are eligible for the Investors’ and Exporters’ (I & E) window.

As a result, he said Deposit Money Banks (DMBs) shall ensure expeditious processing of all eligible invisible transactions on behalf of their customers using the applicable rate at the I & E window.

The central bank director pointed out that the meeting had discussed the policy implementation and implications for the banking public.

How Policy Will Benefit Economy

Speaking on the benefits of the policy, economist,  Joseph Momoh said that a unified exchange rate would mean more revenue from the sale of crude oil.

“The gains of having a unified exchange rate is that it will save the money that the government is losing by giving access to forex to some people below market rate. It is a subsidy and the subsidy regime should end. If there is a single rate market, government will get more revenue, because they can sell all the forex at their disposal at the market rate,” he said.

He also highlighted how the policy will reduce the demand for forex because the ‘privileged persons’ who access the cheap dollar and sell to the Bureau de Change operators will no longer buy at the new rate.

He explained, “The presence of the special rate for special people means that some of the special people who don’t need the forex will demand it just because of the profit they make from it. People round trip because they are in the corridors of power and they can’t be denied access to forex. Now, if you remove that profit, it will lead to reduced demand for forex because they don’t need it. The reduced demand will strengthen the exchange rate. So, you are likely to get an exchange rate that is far from the BDC rate and closer to what we are trying to fix.”

 

JAIZ Bank Appoints Bintube Board Chairman

Jaiz Bank Plc, Nigeria’s pioneer non-interest bank has announced the appointment of Mohammed Mustapha Bintube as the new Chairman of the Board of Directors.

According to a statement from the Bank, Bintube’s appointment followed the approval of the Central Bank of Nigeria (CBN), after his recommendation to the Apex Bank.

Prior to his appointment to the new role, Bintube was a shareholder and the pioneer Managing Director and Chief Executive Officer of Jaiz Bank Plc from 2011 to 2013.

He is currently the Chairman, Buraq Capital Limited from 2014 till date; the current Chairman, Board of Directors of Emerging Africa Trustees Limited from 2022 till date; Chairman, Board of Directors of Neelds Realty from 2021till date; Chairman, Qalam Travels and Tours from 2021 till date.

The new Board Chairman was appointed Chairman, Board Credit & Governance Committee of the Bank of Industry from 2017 to 2022; Chairman, Board Licensing & Regulatory Committee of the Nigeria Communications Commission from 2010 to 2015; Chairman, Board Finance & General Purpose Committee of the Nigerian-Reinsurance Corporation from 1991 to 1993.

Bintube’s over three decades of banking career commenced as Principal Manager, Commercial Bank Credit Lyonnaise from 1989 to 1995; Asst. General Manager, Commercial Bank Credit lyonnaise from 1995 to 1997; Deputy General Manager, FSB International Bank from 1997 to 1999; General Manager, FSB International Bank from 1999 to 2001.

His career snowballed in the banking industry when he was promoted to the rank of Executive Director at the FSB International Bank and served in that capacity from 2001 to 2004.

As consummate banker, Bintube obtained a Bachelor of Science in Business Administration from the Ahmadu Bello University, Zaria in 1981 and Advance Diploma in Banking and Finance from Fin-Africa- Milan, Italy in1989.