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Leaked Bank memo spooks holders of domiciliary (dollar) accounts

A memo purportedly sent to the foreign exchange trading desk of a leading commercial Bank has spooked domiciliary account holders.

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A memo purportedly sent to the foreign exchange trading desk of a leading commercial Bank has spooked domiciliary account holders (depositors who keep money in dollars) in banks.

In the memo seen by Nairametrics, the bank mentioned that ” it has become necessary to review the utilization of inflows into customers DOM accounts”. The source  cannot verify the authenticity of the memo. However, it has been widely shared on some social media platforms and was the subject of debate on Twitter.

In the purported letter, the bank recommended utilization actions for a different type of inflows such as inflows from non-oil and oil proceeds, offshore FX inflows, forex inflows from other Nigerian banks, and inflows from “Internal account to account FX transfers (sourced from offshore inflows)” and Internal account to account FX transfers (sourced from FX cash deposits) FX cash lodgment over the counter.

What seems to have spooked some Nigerians were the recommendations made in the memo. For example, under the category that addressed Offshore FX Inflows Local FX inflows (from other Nigerian banks), Internal account to account FX transfers (sourced from offshore inflows), it recommended that “Transfers to third parties are strictly prohibited”. This suggests inflows from abroad into your local account in Nigeria cannot be transferred to anyone else except you sell to the bank or transfer to yourself.

In another type of FX transfers, Internal account to account FX transfers (sourced from FX cash deposits) FX cash lodgment over the counter, it made the following recommendations.

  • The origin and source of the FX deposit should be determined before customer can be credited to ascertain legitimacy
  • FX cash lodgments should be lodged by only account holders and they can have unfettered access by telegraphic transfer up to a limit of $40,000.00 monthly for payment of medical bills, school fees, subscription to professional bodies, etc., subject to existing CBN guidelines
  • Transfer from one customer to another is prohibited
  • Transfer within related companies is allowed subject to a limit of  $50,000.00 per month.
  • Own use for eligible transfers and in cases as deemed by regulators (savings towards investments, etc.). This should be subject to regulatory limits and backed by signed instructions.
  • Cash drawings.

It is unclear if these directives have the backing of the CBN as the origin or the source of the letter cannot be verified at the time of writing this article.

What this means: In recent days we have seen several internal leaks from banks recommending several measures aimed at curbing access to foreign exchange. For example, a text message purportedly shared by a bank and seen by Nairametrics for example stipulates that “customers can no longer effect FX transfers directly to third parties” explaining that customers can only “sell such funds to the banks”.

  • The CBN is yet to comment on any of these memos and as far as we know has not issued any circular publicly to this effect.
  • If this memo is true, then it suggests other banks are seriously considering capital controls that limit FX speculations in the hope that it will extinguish dollar demands.
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CURRENCIES

Exchange rate gains at NAFEX window as dollar supply improves significantly

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Forex turnover rose significantly by 464% as Nigeria’s exchange rate at the NAFEX window appreciated against the dollar to close at N385.67/$1 during intraday trading on Thursday, October 15.

Also, the naira remained stable against the dollar, closing at N462/$1 at the parallel market on Thursday, October 15, 2020 as BDC operators get another round of dollar supply from CBN

This is also despite the continuation of the protest against the special anti-robbery unit (SARS) by the Nigerian youth which has limited movement in major cities across the country especially Lagos.

Parallel market: According to information from Abokifx, a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N462/$1 on Thursday. This was the same rate that it exchanged for on Wednesday, October 14.

Current developments

  • The local currency has strengthened by about 7.8% within the last one week at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
  • The CBN has sold over $450 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
  • However, the exchange rate against the dollar has failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.
  • BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.
  • We also noted that forex traders monitored during the previous week, appeared to hoard forex, as they anticipated further depreciation in the market.
  • There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure, and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N385.67/$1.

  • This represents a 16 kobo gain when compared with the N385.83/$1 that it exchanged for on Wednesday, October 14.
  • The opening indicative rate was N386.04 to a dollar on Wednesday. This represents a 34 kobo gain when compared to the N386.38 that was recorded on Tuesday.
  • The N392.78 to a dollar is the highest rate during intraday trading before closing at N385.67. It also sold for as low as N382/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window increased significantly by 464% on Thursday, October 15, 2020.

  • According to the data tracked  from FMDQ, forex turnover rose from $29.53 million on Wednesday, October 14, 2020, to $166.55 million on Thursday, October 15, 2020.
  • The CBN had in the past weeks moved to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
  • The huge increase in forex supply after yesterday’s drop reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • Total forex trading at the NAFEX window in the month of August was about $857 million, compared to $937 million in July.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand and shaky economy that has been hit by the coronavirus pandemic
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CURRENCIES

Naira falls again at black market as #EndSARS protest limits movement.

Naira depreciated marginally against the dollar, closing at N462/$1 at the parallel market on Wednesday.

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Forex turnover declined by 63% as Nigeria’s exchange rate at the NAFEX window depreciated against the dollar to close at N385.83/$1 during intraday trading on Wednesday, October 14.

Also, the naira depreciated marginally against the dollar, closing at N462/$1 at the parallel market on Wednesday, October 14, 2020.

Nigerian Youth has been protesting demanding an end to SARS, the special anti-robbery unit of the Nigerian Police. Protest has limited movement in major cities across the country.

Parallel market: According to information from Abokifx, a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N462/$1 on Wednesday. This represents a N1 drop when compared with the N461 that it exchanged for on Tuesday, October 13.

Current developments

  • The local currency has strengthened by about 7.8% within the last one week at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
  • The CBN has sold over $450 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
  • However, the exchange rate against the dollar has failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.
  • BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.
  • We also noted that forex traders monitored during the previous week, appeared to hoard forex, as they anticipated further depreciation in the market.
  • There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure, and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira remains stable against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N385.83/$1.

  • This represents a 17 kobo gain when compared with the N386/$1 that it exchanged for on Tuesday, October 13.
  • The opening indicative rate was N386.04 to a dollar on Wednesday. This represents a 34 kobo gain when compared to the N386.38 that was recorded on Tuesday.
  • The N386 to a dollar is the highest rate during intraday trading. It also sold for as low as N380/$1 during intraday trading.

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined further by 62.9% on Wednesday, October 14, 2020.

  • According to the data tracked  from FMDQ, forex turnover dropped from $79.53 million on Tuesday, October 13, 2020, to $29.53 million on Wednesday, October 14, 2020.
  • The CBN had in the past few weeks moved to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
  • The drop in forex supply reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • Total forex trading at the NAFEX window in the month of August was about $857 million, compared to $937 million in July.
  • The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand and shaky economy that has been hit by the coronavirus pandemic
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CURRENCIES

Exchange rate falls across forex markets as dollar supply drops

The naira depreciated against the dollar, closing at N460/$1 at the parallel market on Monday.

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Forex turnover dropped by 24% as Nigeria’s exchange rate at the NAFEX window depreciated against the dollar to close at N386/$1 during intraday trading on Monday, October 12

Also, the naira depreciated against the dollar, closing at N460/$1 at the parallel market on Monday, October 10, 2020, as the Bureau De Change Operators await another round of dollar supply from the Central Bank of Nigeria.

Parallel market: At the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N460/$1 on Monday, according to information from Abokifx, a prominent FX tracking website. This represents a N3 drop when compared with the N457 that it exchanged for on Friday, October 9.
Current developments

  • The local currency has strengthened by about 7.8% within the last one week at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
  • The CBN has sold over $450 million to BDCs since the resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
  • However, the exchange rate against the dollar has failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.
  • BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.
  • We also noted that forex traders monitored during the previous week, appeared to hoard forex, as they anticipated further depreciation in the market.
  • There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure, and creates a volatile situation in the foreign exchange market.

NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N386/$1.

  • This represents a 17 kobo drop when compared with the N385.83 that it exchanged for on Friday, October 9.
  • The opening indicative rate was N386.33 to a dollar on Monday. This represents a 62 kobo drop when compared to the N385.71 that was recorded on Friday.
  • The N392.89 to a dollar is the highest rate during intraday trading before it closed at N385.83. It also sold for as low as N384/$1 during intraday trading

Forex turnover: Forex turnover at the Investor and Exporters (I&E) window, declined by 24.1% on Friday, October 9, 2020.

  • According to the data tracked  from FMDQ, forex turnover dropped from $134.83 million on Friday, October 9, 2020, to $102.35 million on Monday, October 12, 2020.
  • The CBN had in the past few weeks moved to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
  • The drop in forex supply reinforces the volatility of the foreign exchange market. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
  • The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
  • Total forex trading at the NAFEX window in the month of August was about $857 million, compared to $937 million in July.
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