By Kayode Tokede
Following the early unstable foreign exchange last year, Stanbic IBTC, United Bank for Africa (UBA) Plc and three other commercial banks generated a whooping sum of N247.4 billion from foreign exchange trading in 2017 financial year.
The other three commercial banks are Access bank Plc, Guaranty Trust bank Plc and Zenith Bank Plc.
The local currency, Naira hit rooftop early last year when it traded around N520 against the Dollar due to dwindling oil price and exit of foreign investors that led to scarcity.
Commercial banks invested in fixed income that includes Bonds and Treasury (T-Bills) aside investing in the foreign currencies trading.
Investigation by Nigerian NewsDirect revealed that the five above commercial banks in 2016 generated N53.19 billion from foreign exchange trading.
From the banks audited financial statement, Stanbic IBTC reported N11.09 billion from foreign exchange trading income, 78 per cent increase over N6.2 billion in 2016.
UBA’s Foreign exchange trading income rose significantly by 182.7 per cent to N40.2 billion in 2017 from N14.2 billion in 2016 while GTBank foreign exchange trading income stood at N7.17 billion in 2017 as against N3.8 billion in 2016.
Access bank in 2017 financial year reported N120.26 billion from foreign exchange trading income as against N8.84 billion in 2016.
In addition, Zenith Bank derivatives income rose by 242.2 per cent to N68.7 billion in 2017 from N20.1 billion reported in 2016.
Commercial banks operating in the country, benefited from the Central Bank of Nigeria (CBN) policies to improve liquidity at the foreign exchange.
Part of which include offering customers increased spending limit on their US$ denominated payment cards preparatory to their traveling for summer holidays abroad.
From a flat maximum of $100 spending limit placed on their cards by Nigerian banks in the height the foreign exchange crisis, customers were to spend as much as between $500 and $2000 from their debit cards abroad monthly.
For example, UBA had offered $2000 monthly, 1,900per cent above the previous limit to its card holders while GTBank raised the cap on amount a holder of its naira Mastercard can spend abroad in a month to $1,000 from $100, in line with the relative improvement in foreign-exchange liquidity in the market.
According to analysts, the creation of a market-determined foreign-exchange trading window for investors and exporters in April increased access to dollars and enabled commercial banks to increase its spending limit and boost foreign exchange income in 2017.
Finance analyst who does not want his name in print said, “Many financial institutions provide Foreign Exchange services to their customers. These can include buying foreign currency in cash form, making International bank-to-bank transfers or providing pure Foreign Exchange dealing services for large multi-nationals. These foreign exchange deals can be very profitable to the Banks when there is scarcity.”
The increased spending limit, introduction of Investors & Exporters Foreign Exchange window, among other policies of CBN have impacted on stability of Naira.
The Head of Treasury at Ecobank Nigeria, Olakunle Ezun, had explained to our correspondent that that there has been an improvement in the business environment for banks, especially in the foreign exchange market due to the CBN foreign exchange market interventions.
“A lot of banks have improved liquidity. The CBN has settled a lot of outstanding dollar obligations which affected banks’ positions”, he said.
Fitch Ratings also remarked that the foreign liquidity of Nigerian banking industry has improved due to the Investors’ and Exporters’ foreign exchange window that was introduced in April 2017 by the CBN.