Economy
CBN Faces More FOREX Crisis As Naira Drops By 40%
By Dipo Olowookere
The Nigerian foreign exchange market has in recent times been facing challenges as the naira has lost close to 40 per cent in 18 months.
Specifically, the naira has lost so much of its value on the streets even as the gap between the official exchange rate and the parallel market has continued to widen beyond control.
Between December 2014 and June 2016, the value of the naira depreciated by nearly 40 per cent at the Central Bank of Nigeria (CBN) window from N165 to the dollar which it was, at the end of December 2014.
The depreciation at the parallel market has been more alarming.
Yet, the pressure on the foreign exchange market is not being helped by the declining value of Nigeria’s major source of foreign exchange, oil, at the international market.
The price of crude has been yo-yoing, thereby impacting heavily on Nigeria’s revenue and foreign exchange reserve, which has so far declined by 18.6 per cent to $28.06 billion from the $34.46 billion it was at the beginning of 2015.
In trying to stem the problem posed by the foreign exchange challenge, the CBN has chosen the path of capital control by embarking on measures to reduce the rate of foreign exchange outflow from the reserves.
One, CBN has exempted 41 items from the list of eligible items for foreign exchange, and closed the retail Dutch Auction System (rDAS) in favour of an order-based system.
It has also reduced daily and annual limits on naira cards outside the shores of the country from $150,000 to $50,000 annually and $300 daily, and backed the move by banks to stop accepting foreign currency deposits as well as the recent ban on the usage of naira denominated cards abroad.
Asides this, it also reduced its weekly foreign exchange sales to BDCs from $30,000 to $10,000 and eventually stopped the sales out rightly early this year.
Economic experts have however suggested that the nation’s solution to the current foreign exchange shortfall is to find a way to supplement foreign exchange inflow through increased export earnings, foreign direct investments and Diaspora inflows.
Of all these three sources, Diaspora inflows appear the most readily available source the country can harness to solve the macro-economic challenges posed by foreign exchange shortfall. This is because remittances are the second largest source of foreign exchange in Nigeria after the oil sector.
In 2015, an estimated $21 billion flowed into the country, including $5.7 billion sent from the United States and about $3.7 billion from the United Kingdom.
For 2016, the World Bank estimates that nearly $34 billion in remittances will flow into Sub-Saharan Africa from the more than 30 million Africans living outside their countries of origin. Nearly two-thirds of this expected inflow in 2016, according to World Bank data, will come into Nigeria.
Perhaps it is this huge significance of the money transfer sector to the nation’s economic life that informed the recent efforts by CBN to ostensibly clean the sector. In a recent policy pronouncement, CBN advised citizens to “beware of the unwholesome activities of some unlicensed International Money Transfer Operators” currently plying their trade in the country.
Citing “the greater economic good of Nigeria,” the Central Bank stated that it would “not condone any attempt aimed at undermining the country’s foreign exchange regime”.
Consequently, the regulator first revoked the licences of all but three money transfer companies that had been doing money transfer business in the country, before later approving a second batch of eleven other new international money transfer operators to bring the total number of approved operators for now to fourteen.
The three MTOs that first passed the CBN litmus test were Western Union, MoneyGram and RIA. The second batch of newly registered eleven operators included Trans-East Remittance LLC; WorldRemit Limited; UAE Exchange Centre LLC; Home Send S.C.R.L; Cash point Limited; Weblink International Limited; DT&T Corporation Limited; Wari Limited; Small World Financial Services Group Limited; Fiem Group LLC and CP Express Limited.
According to industry watchers and analysts who have lauded CBN’s recent steps, operators’ practices have not been adding much value to the Nigerian economy or benefit an average Nigerian, it only helps the parallel market to survive and flourish as individual accounts are mostly used during transactions.
Thus, CBN in its bid to ensure the money transfer is legal and transparently beneficial to the Nigerian economy has ordered all licensed MTOs in line with the CBN circular on the sale of foreign currency proceeds of July 22, 2016 to remit foreign currency to respective agent banks in Nigeria for disbursement in naira to the beneficiaries while the foreign currency proceeds are to be sold to Bureaux De Change, for onward retail to end users.
The apex bank also ordered all MTOs to only send 50% of their remittance going forward. In what looks like a mission to protect Nigerians against fraud and other negative antics of many money transfer organizations in the country that is undermining the apex bank’s bid to ensure liquidity and increase the availability of dollars in the system, CBN seems to have taken the least fraud prone approach of allowing only three companies that have physical operations on the ground in Nigeria to continue to function while insisting on others newly allowed into the segment to physically set up shop in the country.
Of the three approved frontline MTOs in this new dispensation, MoneyGram, for example has Lagos as its operational hub for Anglophone West Africa while both Western Union and MoneyGram have strong partnership with almost all deposit banks in addition to a large pool of agents across the country.
It is also a fact that operationally, these three MTOs control over 70 percent of the market. Given the fraud-prone nature of the money transfer business, the need for operators to have traceable presence in the country cannot be over-emphasized.
It may be argued that we are in an age where innovative technology is changing the way customers meet their financial needs, hence the growing importance of mobile money and preference for strong digital platform against virtual or physical network presence by MTOs.
On this score also, an array of digital channels and convenient solutions being marshalled by the leading operators in the market are already becoming a disruptive force. In this regard, the operators’ suite of self-service products and offerings coupled with the strength of their physical network have in no small measure promoted the culture of mobile money as a strength of the cashless economy drive being championed by CBN.
The mobile money culture expectedly brings financial inclusion to millions of people – allowing them to perform financial transactions with a new level of ease and convenience.
Mobile money has emerged as the primary payments system in countries where there was limited or no access to formal financial services. The World Bank estimates that less than a quarter of Africa’s 1.4 billion people have a bank account, but 70 per cent have a mobile phone.
That has made the continent particularly fertile ground for the mobile-payments business. In its 2015 figures, one of the two foremost operators said its digital channel showed impressive growth throughout the year with fourth-quarter transactions up 42 per cent and revenue growth of 48 per cent.
Additionally, it revealed that 14 per cent of its money transfer transactions and 12 per cent of its total money transfer revenue came from digital in the quarter, representing over $163 million when annualizing fourth-quarter revenue.
The noticeable trend in the operations of this MTO of note is its significant progress toward its declared goal to have 15 per cent to 20 per cent of its money transfer revenue coming from digital in 2017.
By working hard to completely overhaul on-line experience, launch kiosks and add millions of mobile wallets with a view to connecting to almost 2 billion bank accounts, this operator aims at pushing digital capabilities further into the physical world through customer profiles and new point of sale technologies which will ensure delivery of a more seamless customer experience.
The merging of physical locations and virtual and online network is no doubt a key competitive advantage while the increasing growth of agents’ location is an extremely important extension of the value adding profile of money transfer business to all stakeholders. Among others, it enhances the reduction of fraud in the transaction process. Of significance also are the various issues relating to pricing of transactions. Pricing can vary from market to market as fees reflect the many benefits offered by the service sought.
A study of rates and fees across several markets however shows that Nigeria is well within range. For example, as indicated on the company’s website, the MoneyGram global average fee including foreign exchange, of less than 5 percent of the face value of the money transferred is substantially lower than the average fee for an international bank transfer and is very competitive in the fund transfer industry.
This fee is lower than the World Bank and G8 goals to provide affordable remittance services to underdeveloped parts of the world. Of additional benefit to the country however is the fact that local agents retain approximately half of the fee paid by the consumer, which in turn is re-invested in local businesses.
Source: http://www.vanguardngr.com/2016/09/cbn-faces-forex-crisis-naira-drops-40-18-months/
By Dipo Olowookere
The three busiest equities on the floor of the Nigerian Exchange (NGX) Limited last week were Access Holdings, Fidelity Bank, and Chams Holdco.
The trio accounted for 20.90 per cent and 5.69 per cent of the total trading volume and value, respectively, after trading 485.749 million units worth N7.656 billion in 17,843 deals.
In the week, investors transacted 2.324 billion shares valued at N134.486 billion in 249,328 deals versus the 3.075 billion shares worth N254.614 billion executed in 287,157 deals in the previous week.
The financial services space led the activity chart with 1.523 billion stocks sold for N47.542 billion in 105,230 deals, contributing 65.53 per cent and 35.35 per cent to the total trading volume and value, respectively. The ICT industry exchanged 198.821 million shares worth N32.622 billion in 29,905 deals, and the consumer goods sector posted a turnover of 151.635 million shares worth N10.933 billion in 23,951 deals.
In the five-day trading week, 22 equities appreciated versus 11 equities a week earlier, 57 equities depreciated versus 78 equities of the previous week, and 67 equities remained unchanged versus 57 equities in the preceding week.
McNichols gained 26.47 per cent to trade at N8.60, International Energy Insurance appreciated by 14.43 per cent to N5.79, GTCO expanded by 10.69 per cent to N127.90, First Holdco jumped by 10.00 per cent to N55.00, and Airtel Africa also climbed 10.00 per cent to settle at N4,358.80.
On the flip side, Trans-Nationwide Express declined by 26.79 per cent to N3.28, Deap Capital slipped by 23.31 per cent to N3.75, Abbey Mortgage Bank lost 20.30 per cent to trade at N8.05, Aradel Holdings contracted by 19.00 per cent to N1,417.50, and Regency Assurance dropped 18.56 per cent to close at 79 Kobo.
The All-Share Index (ASI) and the market capitalisation, which measures the performance level of Customs Street, depreciated last week by 1.65 per cent and 1.60 per cent each to 232,049.02 points and N148.905 trillion, respectively.
Similarly, all other indices finished lower except the CG, banking, AFR Bank Value, AFR Div Yield and MERI Value indices, which grew by 2.40 per cent, 3.51 per cent, 3.28 per cent, 9.93 per cent and 0.56 per cent, respectively.
By Adedapo Adesanya
The Centre for the Promotion of Private Enterprise (CPPE) has cautioned against the Senate’s resolution seeking to ban the importation of textile fabrics, warning that such a move could be counterintuitive as it would undermine key industries, threaten millions of jobs and fail to revive Nigeria’s struggling textile sector.
According to the chief executive of the think-tank, Mr Muda Yusuf, while the objective of revitalising the textile industry was commendable, an outright import prohibition would likely create more economic challenges than solutions.
The Senate had urged the federal government to implement an import ban for an initial period of five years. The motion, sponsored by Senator Sunday Katung, is to create a protected window for domestic cotton farmers and local textile mills to scale up production.
Mr Yusuf noted that the import ban wasn’t the major driving force behind the country’s ailing textile sector, adding that it was driven mainly by structural constraints such as high energy costs, poor infrastructure, expensive credit and obsolete technology.
Other factors, he said, driving the decline of the sector included logistics bottlenecks, smuggling and policy inconsistency, rather than import competition.
According to him, restricting textile imports will disrupt production across the country’s garment, fashion, tailoring, furniture and interior design industries, which depend heavily on imported fabrics as production inputs.
He said that Nigeria’s fashion, garment-making and tailoring industry, valued at about N10 trillion, supported an estimated 10 million livelihoods and represented one of the country’s most vibrant creative economy sectors.
He further stated that the sector generates significant domestic value addition through design, tailoring, branding, embroidery, merchandising and retailing, often exceeding the value of the imported textile inputs.
“Restricting textile imports would increase production costs, reduce consumer choice and threaten thousands of micro, small and medium enterprises engaged in fashion, tailoring and garment manufacturing,” he said.
Mr Yusuf added that textile fabrics were also critical inputs for the furniture and interior design industry, valued at about N7 trillion, warning that supply disruptions would weaken the competitiveness of manufacturers.
He further noted that imported textile fabrics already attracted a combined Import Duty and Import Adjustment Tax of between 35 per cent and 45 per cent, yet the existing tariff protection had not restored the competitiveness of local textile manufacturers.
“The core problem lies in production economics rather than import penetration. An import ban addresses the symptom while leaving the underlying causes unresolved,” he said.
Mr Yusuf also maintained that local textile manufacturers currently lacked the capacity to meet the quantity, quality and diversity of fabrics required by the country’s fashion, garment, furniture and interior design industries.
He warned that an outright import ban could therefore create supply shortages and negatively affect downstream sectors that generated significantly more employment than textile manufacturing itself.
The CPPE boss advocated a comprehensive value-chain strategy to revive the textile industry and called for the restoration of domestic cotton production through improved security, mechanisation, better seedlings, extension services and guaranteed off-take arrangements.
He also stressed the need for affordable long-term financing, access to modern technology, a reliable energy supply and a more competitive operating environment for manufacturers.
Among other recommendations, Yusuf urged the government to prioritise locally produced textiles and garments for uniforms used by the military, paramilitary agencies, schools and other public institutions.
He also recommended the establishment of a Textile Competitiveness Fund financed from textile-related import tax revenues to support technology upgrades and industry modernisation.
Other measures proposed include strengthening border enforcement to curb smuggling and implementing reforms aimed at reducing energy and financing costs while improving industrial infrastructure.
Mr Yusuf stressed that sustainable revival of Nigeria’s textile industry would depend on improving competitiveness rather than imposing additional import restrictions.
He warned that a blanket import ban could encourage smuggling, reduce customs revenue and weaken a broader value chain that contributed substantially to employment and economic growth.
By Adedapo Adesanya
Pathway Advisors Limited has announced its role as Lead Issuing House to a N300 billion Commercial Paper Programme for Pivot Integrated Energy Services Limited, reinforcing its leadership in capital market advisory and energy sector finance.
The transaction was formally concluded with the execution of programme documentation at Capital Club, Victoria Island, Lagos, following the completion of all regulatory and programme clearances. The signing ceremony marked a defining milestone in mobilising large-scale short-term capital for Nigeria’s downstream petroleum sector.
Speaking at the event, the chief executive of Pathway Advisors Limited, Mr Adekunle Alade, emphasised the strategic significance of the Commercial Paper issuance in financing working capital, thereby enabling high-growth energy businesses to scale efficiently and sustainably.
“Nigeria’s downstream energy sector is undergoing a profound transformation, accelerated by the removal of fuel subsidies, the emergence of domestic refining capacity, and rising demand for reliable product supply across the country and the broader West African region.
“Companies like Pivot Integrated Energy Services Limited with a vertically integrated model, a strong track record, and a clear growth mandate are exactly the kind of issuers that the capital markets should be financing,” Mr Alade stated.
“Commercial paper, when structured appropriately, gives operationally strong businesses access to a deep and diverse pool of institutional investors, at tenors and costs that support the working capital intensity of petroleum trading and distribution. This transaction is a testament to what is achievable when credible issuers partner with experienced advisers to access the markets,” he added.
“The successful execution of this programme further affirms Pathway Advisors’ position as a trusted financial advisory and investment banking firm in complex, large-scale capital market transactions,” he stated.
In his comments, the chief executive of Pivot Integrated Energy Services Limited, Mr Babajide Babatope, described the commercial paper programme as a pivotal step in the company’s strategy to expand its supply capacity and strengthen its position as a leading integrated energy provider in Nigeria and West Africa.
“Nigeria’s downstream energy market demands scale, speed, and the right capital structure to compete effectively. This commercial paper programme gives us the financial firepower to support our growing volumes, reinforce our supply chain, and serve our customers with greater reliability across the regions we operate in,” Mr Babatope disclosed.
He noted that Pivot is one of the 20 approved off-takers in the Dangote Refinery PMS Consortium, with a target volume of 300 million litres per quarter, a position that underscores the company’s standing in Nigeria’s post-subsidy energy supply architecture. He added that the CP Programme would also support the company’s accelerating regional push, including active operations in Ghana, where Pivot has delivered over 100,000 MT since April 2025, and a planned entry into Tanzania with deliveries targeted in Q3 of 2026.
Mr Babatope further expressed appreciation to Pathway Advisors and other transaction parties for their professionalism, rigour, and commitment throughout the programme’s execution, and signalled his intention to continue deepening these partnerships as Pivot advances to subsequent phases of growth and financing.
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