Nigerian banks’ dollar earnings under pressure as investments shrink
The juicy foreign exchange earnings of Nigerian banks have come under intense pressure due to low dollar economic activities, analysis and expert opinions have said.
Available data gleaned from the Nigerian Exchange Group (NGX) showed five banks- Stanbic IBTC Holdings, FBN Holdings, Wema Bank, Guaranty Trust Holding Company, and Union Bank, recorded a decline in foreign exchange earnings while two others – Fidelity Bank and Zenith Bank, recorded foreign exchange loss in the first quarter of 2023.
“There were FX shortages during the period reviewed which reveals that banks were unable to engage in more foreign exchange transactions,” said Tesleemah Lateef, Banking Analyst at Cordros Securities Limited.
Stanbic IBTC Holdings saw its foreign exchange earnings drop 38 per cent to N14.22 billion in the first quarter of 2023 from N22.95 billion in the first quarter of 2022.
FBN Holdings foreign exchange earnings stood at N3.03 billion in the first quarter of 2023, a 47.3 percent decline from N5.75 billion in the first quarter of 2022.
Banks in Nigeria are particularly at risk because of “the constrained availability of foreign currency liquidity in the country as a result of constraints on domestic oil production and capital outflows, coupled with US dollar strengthening,” said Vice President for emerging markets banks at Moody’s, Mik Kabeya.
Wema Bank’s foreign exchange earnings stood at N0.48 billion in the first quarter of 2023, a 12.7 per cent drop from N0.55 billion in the first quarter of 2022.
Guaranty Trust Holding Company’s foreign exchange earnings dipped to N0.19 billion in the first quarter of 2023, 94.3 percent decrease from N3.33 billion in the first quarter of 2022.
Union Bank’s foreign exchange earnings dipped 93 per cent to N0.14 billion in the first quarter of 2023 from N1.98 billion in the first quarter of 2022.
“There has been a consistent decline in FX because there is no inflow as a result of low foreign investors in the Nigerian market,” Lateef said.
Fidelity Bank recorded a foreign exchange loss of N0.32 billion in the first quarter of 2023 from N0.86 billion foreign exchange loss in the first quarter of 2022.
Zenith Bank recorded a foreign exchange loss of N1.21 billion in the first quarter of 2023 from foreign exchange earnings of N10.48 billion in the first quarter of 2022.
“Declining foreign reserves, lower oil production and Nigeria’s rising import compared to export are also contributing factors,” Lateef said.
Two banks recorded foreign exchange gains in the period under review.
Access Holdings’ foreign exchange earnings stood at N112 billion in the first quarter of 2023, up 30.5 per cent from N85.83 billion in the first quarter of 2022.
