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Banks’ income from forex trading jumps 114% to N145bn

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CBN investigates 55 companies over foreign exchange infractions

As I&E turnover dips 39% to $30.8 bn

By Babjide Komolafe & Elizabeth Adegbesan

 

Notwithstanding the sharp depreciation of the Naira and the acute dollar shortage in the economy, income from foreign exchange trading by Nigeria’s top banks rose sharply by 110 percent, year-on-year, to N145 billion in the nine months ending September 2020.

During the nine months period, the Naira suffered 5.9 percent and 28 percent depreciations in the Investors and Exporters (I&E) window and in the parallel market respectively.

Also during the period the exit of Foreign Portfolio Investors, FPIs, and sharp decline in the nation’s forex earnings triggered by the COVID-19 pandemic, led to acute dollar scarcity in the economy.

Amidst these adverse development, some of the leading banks recorded huge increases in forex income while one of them recorded over 1,000 percent rise in forex trading income during the nine months period.

Financial Vanguard analysis of the financial statements of 12 banks    showed that the forex trading earnings were dominated by six banks. These are Access Bank, GTBank, UBA, Union Bank, FCMB and Stanbic IBTC.

Three other banks, however, recorded decline in their forex trading income namely, First Bank, Sterling Bank and Wema Bank.

Leading the chart is Access Bank, which recorded forex trading income of N63.98 billion in nine months ending September 2020. This represented increase of 542 percent when compared with N9.96 billion recorded in the corresponding period of 2019.

Stanbic IBTC Bank followed with forex trading income of N44.37 billion in 2020, up by 63 percent, from N27.19 billion in the corresponding period of 2019.

UBA’s size of forex income came third but growth rate was marginal rising by just 1.6 percent to N19.88 billion in 2020, from N19.572 billion recorded in the corresponding period of 2019.

GTB Bank, on its part recorded N12.11 billion as forex trading income in 2020, up by 203 percent from N3.99 billion in 2019.

Union Bank also increased its forex trading income by 156 percent to N2.28 billion in 2020, from N889 billion in the corresponding 2019.

FCMB’s forex income, though relatively small in size, represented the most astonishing growth rate of 1,024 percent increase hitting N2.26 billion in 2020, from N201 million in the corresponding period of 2019.

 

Decliners

First Bank suffered the biggest decline in forex trading in the nine months ending September 2020. The statements of the bank’s holding company show it recorded 89 percent decline in its forex trading income to N624 million in 2020, from N5.695 billion in the corresponding period of 2019.

Sterling on its part recorded 65 percent decline in its forex trading income which fell to N128 million in 2020 from N364 million in the corresponding period of 2019.

Wema Bank also recorded 4.5 percent decline in its forex trading income which dropped to N142 million in 2020 from N149 million in 2019.

 

Turnover in I&E dips 39%

Meanwhile, volume of dollars traded (turnover) in the I&E window of the Nigerian foreign exchange market fell by 39 percent to $30.8 billion in 11 months ending November 2020, from $57.07 billion in the corresponding period of 2019.

The sharp decline reflects the dearth of forex supply into the window, especially from FPIs which fled Nigeria and other emerging markets to escape the currency depreciations anticipated in the countries.

Financial Vanguard analysis of monthly turnover in the I&E window showed that turnover dropped by six percent in  January 2020 to $5.6 billion from $5.3 billion in December 2019.

But in February 2020, turnover rose by 31 percent to $7.34 billion and up again by 3.0 percent to  $7.55 billion in March.

However, turnover fell  sharply by 88    percent in April to $873.96 million and down again by 30  percent in May to $612.45 million.

The fluctuation intensified through the remaining months of the year as turnover rose sharply by  62   percent in June to $992.12 million but went   down by six percent to $937  million in July.

The downward trend continued in August as turnover dipped by 10 percent to $843.97 million only to rise by  129 percent in September to $1.98 billion.

In October, turnover fell by 14 percent to $1.7 billion but rose by 37 percent to $2.32 billion in November.

Financial Vanguard analysis of weekly turnover in November showed that $641.7 million was traded in the  first week of November. Turnover rose by 9.0 percent to $701.5 million in the second week but down by 0.5 percent to $366.5 million in the third week.

The turnover increased in   the fourth week by 56 percent to $572.6 million and stood at $35.15 million on  the last day of November.

The naira depreciated by N4.62 kobo in November as the indicative exchange rate of the window rose to N390.25 per dollar on 30th November from N385.63 per dollar on November 2nd, 2020.

 





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