By Nse Anthony-Uko
ABUJA, (Sundiata Post) – Tier-one lender, Guaranty Trust Bank (GTB) has raised the monthly international spend limit on its naira MasterCard by 900 per cent, signalling an end to the country’s foreign exchange liquidity crisis, a direct fallout of the CBN’s consistent intervention in the market. Perhaps the biggest indicator that Nigeria’s
The lender said in a July 10 note to customers that “The monthly International spend limit on our Naira MasterCard has been reviewed upwards from $100 to $1,000, effective July 10” GTB, Nigeria’s largest bank by market capitalisation. That is a 900 percent increase.
While this is a welcome development to customers, the review however comes at a higher prize as the withdrawal commission was also jacked up
The note also stated that “Cardholders can now withdraw $300 daily (subject to monthly limit) on International ATM.” It however said the withdrawal commission has been reviewed upward by some 138 percent, to N1,000 per withdrawal from N420.”
GTB’s share price was up 0.06 per cent to N34.62 on Monday, in line with the banking index which rose 1.97 percent to 396.7 points, according to data tracked by BusinessDay.
“This is probably the biggest indicator that the country’s foreign exchange situation is normalising,” said Johnson Chukwu, CEO of Cowry Assets, an asset management firm.
“This will help take some speculative activities off the market and reduce demand pressure from people who had to source dollars at the black market because they couldn’t use their naira card for international transactions,” Chukwu said by phone.
Other banks are likely to follow in GTB’s path by raising their own dollar limits in line with increased liquidity, said Ayodele Akinwunmi, head of research at FSDH Merchant Bank.
“The dollar situation has improved and the banks have more dollars now,” Akinwunmi said by phone.
Hard hit by an acute dollar shortage brought on by shrinking petrodollars and unorthodox CBN policies which crimped foreign portfolio inflows, most Nigerian banks suspended their Automated Teller Machine cards (debit and credit) from working overseas.
In October 2016, GTB slashed its monthly spending limits from $250 to $100, as sourcing dollars became more difficult, even as regulatory bottlenecks constrained dollar flows.
As a result, customers were unable to carry out cross border transactions or transactions priced in foreign currency, using their naira debit, credit and prepaid.
Those seeking to do foreign transactions had to open domiciliary accounts and fund same with dollars, pounds or euros purchased from the parallel market at the prevailing exchange rates.
The dollars shortages have however eased in the past four months, after the CBN upped dollar sales to grease the once illiquid market.
Since March, the CBN has stepped up foreign exchange sales to importers, SMEs and retail end users. It has also created a new window meant to serve investors and exporters (NAFEX), which it says the rates are market determined.
These steps have culminated in the CBN selling close to $6 billion and eased some pressure off the naira. It led to a 20 percent exchange rate appreciation year-to-date.
The NAFEX declined by less than 1 percent to N364.66 per US dollar on Monday, while the NIFEX closed at N325 per US dollar, according to data by trading platform, FMDQ OTC.
The CBN’s interventions in the market have crashed the parallel market rate from an all-time high of N520/$ to about N385/$.
The ability of Nigerian banks to access foreign currency has improved considerably since the Central Bank (CBN) introduced a foreign exchange window, aimed at investors and exporters, global credit rating agency, Fitch said last month.
“In our opinion, NAFEX offers a more transparent alternative to accessing foreign currency, than is available through the other foreign-exchange markets in the country,” the New York-based ratings agency said.
In the week-ended June 30, 2017, trading activity in the Spot FX market between the banks and their clients stood at $576.77 million (average daily turnover of $192.26 million), representing a 29.26% decrease from the $815.32 million (average daily turnover of $163.06 million), recorded in the previous week.
Similarly, activity in the Spot FX market amongst banks for the same trading week, revealed a 19.00% decrease, as a total turnover of $129.20 million (average daily turnover of $43.07 million) was recorded against the $159.51 million (average daily turnover of $31.90 million) reported the previous week.
The CBN continued its supply of US Dollars in the FX markets, offering $100.00mm at a marginal rate of $/₦320.00 via a single Secondary Market Intervention Sales (SMIS) – Wholesale session held during the week-ended July 7, 2017.
The apex bank also sold $50.00mm for Small- and Medium-Scale Enterprises and $45.50mm for retail invisibles transactions.
The Investors’ & Exporters’ FX Window recorded a total of $312.06 million, traded for the week-ended June 30, 2017, representing a 32.44% decrease from $461.94mm recorded the previous week. This brings the total volume traded at the window since its inception in April to $3.74 billion.
The Investors & Exporters FX Window which allows investors trade at market-determined rates, has gone considerably far in arresting a crippling dollar shortage. Stocks rallied to a two-year high on the back of the new window.
The economy contracted 1.5 percent in 2016, the first such slump in 25 years, but is now tipped to expand 0.8 percent this year, according to the International Monetary Fund (IMF), as oil revenues receive a boost from rising production and higher prices relative to last year.
The country’s lenders, especially small- and medium-sized banks, have been hard hit by the economy’s woes as companies scaled back output and workers lost their jobs.
Non-performing loans as a percentage of gross loans worsened to 14 percent at the end of December from 11.7 percent at the end of June, the central bank said earlier this month.
Banks are now expecting a reduction in non-performing loans and an improvement in profitability following an increase in the oil price and dollar flows in the country.