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In line with CBN’s directive, banks expose clients with suspicious dollar transactions

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In line with the resolve of the Central Bank of Nigeria (CBN) to halt a regime of arbitrage in the foreign exchange market, some Nigerian banks have started exposing the identities of customers, who allegedly obtained dollars by false pretence, and traded them at a profit in the parallel market.

This is coming as the aggregate broad money supply, M3 Money, which represents the amount of money circulating in the economy, rose to N44.56 trillion in January, representing a 1.70 per cent growth year-to-date, a report by the CBN, has shown.

Some bank customers have been taking advantage of the lucrative 37 per cent differential between the official and black market exchange rates by obtaining the dollar at the official rate of about N416, only to subsequently sell in the unauthorised market at a more expensive average rate of about N570.

These customers can beat regulations by presenting false travel documents, prompting the apex bank to direct banks to notify their customers of an impending crackdown on saboteurs in the forex market.

However, a report by Bloomberg yesterday revealed that some banks have begun to implement the CBN’s directives by publishing the names of clients found to have filed suspicious claims for forex transactions on their websites last week.

For instance, Zenith Bank Plc, the nation’s biggest lender by market value, has published 987 names of customers engaging in the illegal practice on its website, Fidelity Bank Plc identified 83 customers; First City Monument Bank Plc listed eight names so far, while Wema Bank published one name. The list of banks that complied also included the United Bank for Africa Plc.

The apex bank had directed banks to identify such customers and ensure they refund the hard currency. The regulator first alerted banks of the ongoing practice last year.

The CBN had said: “Consequently, further to the various measures already put in place, all banks are hereby directed to publish on their websites the names and BVN of defaulting customers who present fake travel documents or cancel their tickets and fail to return the purchased PTA/BTA within two weeks as stipulated in the customer declaration form signed by them.”

Some deposit money banks acting on the directive of the CBN had sent notices to their customers warning that identities and Bank Verification Number (BVN) of those who contravene the apex bank’s new forex policy on overseas personal and business travels would be published.

The CBN had also directed that travellers who buy foreign exchange from banks for travel purposes but fail to embark on the trip after two weeks of their scheduled travel date must return the forex to the banks.

The banks in their notices also pointed out consequences for those customers who engage in fraudulent and unethical practices with regards to the purchase of Personal Travel Allowances (PTA) and Business Travel Allowances (BTA).

In its notice to customers, one of the Tier 1 banks had said: “We have been directed by the Central Bank of Nigeria to inform all our customers that unethical practices to circumvent the new CBN policy on the sale of forex, such as the presentation of false travel documents, visas, and the cancellation of flight tickets, after purchasing personal travel allowance and business travel allowance, will no longer be tolerated.

“Defaulting customers who present fraudulent travel credentials or cancel their tickets and fail to refund the purchased PTA and BTA within two weeks, as stated in the signed customer declaration form, will have their identities and bank verification numbers published.

“We aim to implement this policy immediately as an organisation that is fully compliant with the Central Bank of Nigeria’s rules and regulations.

“Our bank is committed to partnering with the CBN to ensure a transparent, efficient and stable FX Market that meets the needs of all legitimate users.”

Aggregate Money Supply Rises to N44.56tn in January

Meanwhile, the aggregate broad money supply, M3 Money, which represents the amount of money circulating in the economy, rose to N44.56 trillion in January, representing a 1.70 per cent growth year-to-date, a report by the CBN, has shown.

A recently released Depository Corporations Survey by the apex bank, quoted by Cowry Asset Management Limited, showed that the growth was driven by a 1.46 per cent increase in M2 to N44.46 trillion and a sharp increase in CBN bills to N107.38 billion, from N100 million in the preceding month) amid efforts to rein in surplus liquidity.

M2 is a measure of the money supply that includes cash, checking deposits, and is easily convertible near money

However, analysts from Cowry Asset Management Limited noted that the growth in central bank bills also came with its cost implications, as well as increased indebtedness of the apex bank.

According to the latest edition of Cowry Financial Markets Review, Outlook & Recommended Stocks, growth in Broad Money supply was on the back of increases in Quasi Money (consisting of time deposits, near-maturing securities, foreign currencies, etc) and Narrow Money or M1 Money (comprising demand deposits and currency outside banks) by 0.34 per cent and 3.03 per cent to N25.74 trillion and N18.72 trillion, respectively.

“Increases in quasi money may not be unconnected to, among other things, growing appetite of pension funds administrators to place retirement savings with commercial banks at relatively attractive interest rates. “As reported in the February 11, 2022 edition of our CWR, we observed that money moved out of T-bills securities to Local Money Market Securities (LMMS), especially bank placements,” the report stated.

It noted that the total funds invested in this investment category rose by 20.04 per cent to N2.03 trillion in December 2021 (lifting its share of the total assets to 15.09 per cent), from N1.69 trillion in December 2020 (or 13.71 per cent of total assets).

The CBN document was quoted as saying that that Reserve Money rose by 2.36 per cent to N13.61 trillion as bank reserves with the Central Bank increased by 3.51 per cent to N10.32 trillion (partly in tandem with increased deposits at the banks), to partly offset by a 5.52 per cent decline in currency outside banks to N2.78 trillion.

On the asset side, Net Domestic Credit grew by 2.49 per cent to N49.73 trillion as Credit to the Private Sector upped by 0.73 per cent to N35.45 trillion while Credit to the Government increased by 7.13 per cent to N14.28 trillion. However, Net Foreign Assets moderated by 1.79 per cent amid pressures on Nigeria’s foreign sector.

Meanwhile, Cowry Assets analysts have warned that the rise in the Narrow Money without a faster rise in GDP may result in higher inflation in 2022.

It noted that in 2021, the velocity of Narrow Money moderated to 10.16 times from 11.49 times in the preceding year even though Narrow Money rose by 14 per cent over the period, saying the productivity of the country needs a lot of improvement going forward.

The report warned that the escalation of hostilities between Russia and Ukraine and the attendant instability in the global oil market will exert pressure on the nation’s external reserves.

It said: “Meanwhile, in the wake of the Russian Invasion of Ukraine, we are concerned that Nigeria would not optimally benefit from any ensuing rise in crude oil prices due to its suboptimal crude oil production. This would increase pressure on the external reserves as well as exchange rates as oil dollar revenues, its primary foreign currency earner, would struggle to meet the higher cost of imported refined products in addition to other imports.”

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BUSINESS

US stocks suffer biggest daily drop in almost two years

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US stocks posted the biggest daily drop in almost two years as investors assess the impact of higher prices on earnings and prospects for monetary policy tightening on economic growth. The dollar and Treasuries gained amid a pickup in haven bids.

The selloff sent the S&P 500 down 4%, with the plunge in consumer shares surpassing 6%. Target Corp. tumbled more than 20% in its worst rout since 1987, after trimming its profit forecast due to a surge in costs. Shares of retailers from Walmart Inc. to Macy’s Inc. were caught in the downdraft. The Nasdaq 100 fell the most among major benchmarks, dropping more than 5% as growth-related tech stocks sank. Megacaps Apple Inc. and Amazon.com Inc. slid at least 5%.

Treasuries rose across the board, sending the 10- and 30-year Treasury yields down as much as 11 basis points. The dollar rose against all of its Group-of-10 counterparts, except the yen and Swiss franc. Gold caught bids in the move into havens.

The benchmark S&P 500 is emerging from the longest weekly slump since 2011, but any rebounds in risk sentiment are proving fragile amid tightening monetary settings, Russia’s war in Ukraine and China’s Covid lockdowns.

In some of his most hawkish remarks to date, Federal Reserve Chair Jerome Powell said Tuesday that the US central bank will raise interest rates until there is “clear and convincing” evidence that inflation is in retreat. Chicago Fed President Charles Evans said Wednesday he sees a half-point rate increase at next month’s meeting and “probably thereafter.”

In Europe, new-vehicle sales shrank for a 10th month in a row as the industry remains mired in supply-chain crises, while euro-area inflation plateaued at a record high. Meanwhile, UK inflation rose to its highest level since Margaret Thatcher was prime minister 40 years ago, adding to pressure for action from the government and central bank.

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Netflix lays off 150 employees due to slow revenue growth and business needs

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Netflix is reportedly laying off nearly 150 employees in the coming days due to disappointing earnings and slow revenue growth.

According to a Variety report, the Amazon Prime Video rival might also terminate its contract with contractual contributors.

The layoffs are about 2 per cent of Netflix’s US workforce. “As we explained [in reporting Q1] earnings, our slowing revenue growth means we are also having to slow our cost growth as a company. So sadly, we are letting around 150 employees go today, mostly U.S.-based,” a Netflix spokesperson said.

The statement further revealed that the decision was primarily driven by business needs rather than individual performance. Netflix reported $7.87 billion in Q1, which was short of Wall Street’s estimates of $7.93 billion.

The report further reveals that nearly 70 part-time employees in Netflix’s animation studio will have to pack up and leave. A report by The Verge stated that about 26 contractors working on Netflix’s fan-focused Tudum website might see a termination.

“A number of agency contractors have also been impacted by the news announced this morning. We are grateful for their contributions to Netflix,” the company said.

Netflix, in its recent earnings call, revealed that it lost thousands of subscribers, which is a first for the company in over a decade.

The company expects to lose an additional 2 million in the next quarter due to the ongoing war between Russia and Ukraine. Netflix has shut shop in Russia following the country’s invasion of Ukraine.

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Dollar breaks N600/$ ceiling ahead of party’s presidential primaries

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Less than two weeks to the presidential primaries of the political parties ahead of the 2023 elections, the US dollar has broken the N600/$ mark at the parallel market and set the tone for a possible uptick in the coming days.

The black market rate had traded between N570/$ and N590/$ since the beginning of the year while the Central bank of Nigeria (CBN)’s intervention at the Nigerian Autonomous Foreign Exchange (NAFEX) has kept its rate under N420/$.

With the latest slump of the naira, the arbitrage between the parallel and NAFEX, which is regarded as the official window, is now inching close to N200/$. The spread measures the deviation of the controlled official rate from the real rate of exchange, with experts calling for liberalisation of the market to enable naira to find its true value.

The World Bank and the International Monetary Fund (IMF) have also warned of the repercussions of sustaining an artificially high naira while calling on the CBN to embark on market reform.

But the CBN has maintained that Nigeria, with the current high level of importation and underperformance of the industrial sector, cannot afford to float the naira completely as the exchange rate could spill out of control.

At the Lagos street market, yesterday, naira traded between N595/$ and N600/$ band. With the presidential primaries of the two leading political parties scheduled for Abuja next weekend, there is an expectation the demand pressure has not peaked, suggesting that naira is in for a protracted pressure.

At peer-to-peer (P2P) trading platforms, the dollar has been trading above N600 in the past three weeks, which had signaled that the black market rate could break through the psychological ceiling.

With that eventually happening, naira could be on a renewed free fall.

But there is also hope that it is a season to offload warehoused hard currencies for political campaigns to possibly shore up supply.

Experts are not sure where rising demand and supply of foreign exchange would lead the naira to, but the interplay between the movements of the two variables is a key factor in predicting the value of the naira in the tense political season. Godwin Owoh, a professor of applied economics, advised Nigerians to prepare for a steeper fall of the local currency, saying partisan politics and intra-party meetings, which are highly dollarised would bring much pressure to bear.

The CBN has promised to continue to protect the naira but its ability could be constrained by the equally falling reserve. For the first time in eight months, the gross reserves dropped below N39 billion on Monday, when CBN data put the figures at N38.92 billion. Effectively, the country’s reserves have depleted by $160 billion year-to-date.

Bismarck Rewane, an economist, had projected the reserve to collapse to $32 billion in the year as he expected the CBN to spend $8 to $10 billion defending the naira, which is taking much pressure from excessive importation.

The value of Nigeria’s imports increased by 64 per cent last year to N20.84 trillion. Sadly, the value of exports increased at a slower rate – 51 per cent – to N18. 91 trillion in the same period. The falling reserves and rising imports have put the apex bank in dire straits in its efforts to continue to defend the naira.

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