Commercial banks are revaluing their foreign currency holdings and paying off debts ahead of timeline as dollar liquidity improves, The Nation has learnt.
The improvement seen in foreign reserves at $47 billion, regular Central Bank of Nigeria (CBN) foreign exchange interventions, over $51 billion in Investors’ & Exporters’ Forex Window and other foreign capital inflows have all helped to boost banks’ dollar positions and strengthened investors’ confidence in the economy.
First Bank Nigeria Limited redeemed a $300 million Eurobond before maturity and paid all bondholders. The seven-year bond was issued in 2013 at 8.25 per cent and had been due to be repaid in 2020. The bank announced its intention last month to repay the debt before maturity. It said the redemption had no impact on its capital ratios and that it had built up dollar liquidity over the past year.
The bank said it did not plan to issue another Eurobond in the near term, because it had ample liquidity to meet its foreign and local currency funding needs.
Also, a report by Exotic Capital, emerging market investment bank, on GTBank showed the lender enjoys “robust net long dollar position”, which should continue to provide a natural hedge to further exchange rate adjustments.
The bank’s non-interest revenue for the second quarter of 2018 was boosted by strong foreign exchange trading gains, including N6 billion in forex trading gains compared with N21 million loss in second quarter of 2017 when forex crisis was intense. This, in addition to notable increases in dividend income/recoveries, net fee income and foreign currency revaluation gains put the lender in good position.
The CBN, in the communique released after the last Monetary Policy Committee (MPC) meeting, acknowledged the progress made in recent times in stabilizing the foreign exchange market and anchoring inflation expectation lower.
It said supportive external account condition – stable oil prices, rising current account surplus and external reserves – which empirical studies have emphasised to be the major anchor of monetary policy all point to improvement in the foreign currency positions for the economy and banks.
Nigerian banks cut lending last year due to weak economic growth and foreign currency risk. However, several of them are eyeing loan growth this year, citing economic improvements and especially as the CBN introduces liquidity to the banking sector targeting credit to manufacturers.
The foreign exchange reserves currently at $47 billion have continued to ensure that the naira remains stable at the official and parallel markets.
