Business

CBN’s Recent Moves Will Help Alleviate Hardship Faced By Nigerians, Businesses – Fitch

fitch-696x456

Global issuer and bond ratings agency, Fitch Ratings, says the Central Bank of Nigeria, CBN’s new policy actions on foreign exchange may help ease the foreign currency liquidity pressure faced by the country’s banking sector and also bring about stability in the banks.

This was as it expressed optimism that the recent moves by the CBN will, in no small measure, help to alleviate the acute hardship on individuals and businesses, owing to the scarcity of the United States, US Dollar.

The international rating agency observed that Nigeria’s apex bank have moved to increase intervention in the foreign exchange, FX, interbank market to increase supply.

Noting that the measure is aimed at clearing the backlog of overdue foreign currency obligations owed by banks to their international creditors, Fitch was specific that “the most important aspect of the CBN’s announcement is a plan to normalise the FX interbank market”.

It recalled that the CBN had stated that providing foreign currency to the manufacturing sector was still a priority, but observed that “with restrictions eased, larger banks with greater access to foreign currency will be free to lend to the smaller banks whose access to international funding is restricted.

“The CBN has also reduced the maximum waiting times for banks to take delivery of foreign currency through its forward sales contracts to 60 days from 180,” it said in a statement issued on Wednesday.

Reacting to the buying of $371 million by banks out of the $500 million forwards that was announced by the apex bank, Fitch said, “This should help banks make more timely payments to creditors, speeding up the flow of currency to importers and helping the economy.

“The CBN’s initiatives are an important boost for banks as access to foreign currency liquidity is tight and banks have struggled to meet their foreign currency obligations.”

The agency, however, noted that the operating environment for Nigerian banks was still challenged by the oil price shock, slow GDP growth, pressure on the naira, scarce access to foreign currency and policy uncertainty.

“The CBN plan will also make it easier for individuals and business customers to meet their foreign currency travel and other personal needs because it will sell foreign currency to banks at a rate not exceeding 20% over the interbank (official) rate for these purposes,” it added.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

To Top