With Central Bank of Nigeria (CBN) suspending Foreign Exchange (FX) supply to Bureau De Changes (BDCs), a total of six banks in nine months of 2021 generated N145.6billion income from trading in FX.
The six banks in prior nine months of 2020 had generated a total of N47.16billion from trading in the FX market.
The six banks are Sterling bank Plc, Union Bank of Nigeria Plc, Wema Bank Plc, Guaranty trust Holding Company Plc (GTCO), Access bank Plc and United Bank for Africa Plc (UBA).
For instance, Sterling Bank reported N4.75billion from FX trading in nine months of 2021 from N128million reported in nine months of 2020, while Wema Bank grew its FX trading income by 47 per cent to N207million in nine months of 2021 from N141 million in nine months of 2020.
The likes of Union Bank of Nigeria reported N3.44billion FX trading income in nine months of 2021, an increase of 51.05 per cent from N2.28billion reported in nine months of 2020.
Further checks by THISDAY revealed that Tier-1 banks benefitted tremendously from FX trading income in the period with Access bank reporting a net FX trading gain of N86.81billion in nine months of 2021, 587 per cent increase from N12.63billion reported in nine months of 2020.
United Bank of Africa reported 78.8 per cent increase in FX trading income to N35.56billion in nine months of 2021 from N19.88billion in nine months of 2020, while GTCO grew its FX trading gain to N14.88billion in nine months of 2021 from N12.10billion reported in nine months of 2020.
The Central Bank had in July this announced that it has ended the sales of FX to BDC operators, stating that the parallel market has become a conduit for illicit FX flows and graft.
The central bank had also announced that it will also no longer process applications for BDC licences in the country.
Analysts expressed that the suspension of FX to BDC operators positively impacted on banks value of FX trading, stressing that the adjustment of Naira to N410.8 (selling rate) against the Dollar also contributed to trading income.
The Governor, Central Bank, Mr. Godwin Emefiele in February stated that naira depreciated at the official market to N410 against the dollar.
Emefiele said the drop in crude oil earnings and the associated reduction in foreign portfolio inflows significantly affected the supply of foreign exchange into Nigeria.
He said, “In order to adjust for the decrease in the supply of foreign exchange, the naira depreciated at the official window from N305/$ to N360/$ and now hovers around N410/$.’’
Speaking with THISDAY on the development, analyst analyst at PAC Holdings, Mr. Wole Adeyeye said the volume of FX trading in banks increased amid the CBN suspension of FX to BDCs.
He noted that customers in need of FX for Basic Transport Allowance (BTA), among other legal transactions approached banks to transact businesses, leading to income generated in the period.
“A lot bank customers who transact foreign business and, seeking for Personal Travel Allowance (PTA) drive volume of FX trading in the banking sector. Besides, the adjustment of FX by CBN also impacted on income generated by banks,” Adeyeye.
Also speaking, the Vice President, Highcap securities, Mr. David Adnori, said the fee charged on FX income increased in the period as banks recorded hike in flow of transactions.
“Bank customers who could have accessed FX from BDC operators were patronizing banks and that increases fees they were collecting from collecting. Banks were also trading FX which is expected to increase income generated in the period.”
He explained further that increasing foreign reserves means the apex bank can meet all legitimate transactions channeled through the banks.
The CBN had said that parallel market represented less than one percent of FX transactions and should never be used to determine Nigeria’s dollar exchange rate.
However, some banks recorded decline, while some losses amid the FX devaluation of the naira.
Top tier 1 banks like Zenith Bank and GTCO recorded decline, while UBA recorded loss in the period under review.
Zenith Bank in nine months of 2021 recorded 25 per cent in foreign currency revaluation gain to N15.42 billion from N20.57billion reported in nine months of 2020, while GTCO’s Foreign currency revaluation gain dropped by 28 per cent to N15.48billion in nine months of 2021 from N21.62billion in nine months of 2020.
In addition, UBA reported foreign currency revaluation loss of N11.2 billion in nine months of 2021 from N9.23billion reported in nine months of 2020.
Adnori added that: “a weaker naira also increases Nigerian banks’ risk-weighted assets related to their foreign currency loans, putting negative pressure on their capital metrics, but, the banks hold good capital buffers.”