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More hurdles as banks’ suspension of BDC accounts lingers

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Not a few financial market experts are shocked by the  banks’ suspension of Bureau de Change (BDC) operations over taxes on turnover volumes.

But, many of the BDCs that have faced tougher challenges, including the battle for margin raise, which the Central Bank of Nigeria (CBN) has granted, the new war will, like others before them, give way.

It was learnt that many banks are writing to BDCs and implementing a ‘Post No Debit’ order on the operators’ accounts making it difficult for them to sustain their businesses.

The Association of Bureau De Change Operators of Nigeria (ABCON) described the suspension of BDCs accounts as illegality that must be addressed in the interest of the economy and financial system stability.

According to ABCON President, Aminu Gwadabe, the banks, acting on the directive of the Federal Inland Revenue Service (FIRS), have been demanding that the BDCs pay taxes on bidding funds used for dollar collections. The funds are sent through the commercial banks to the CBN weekly.

He said: “The BDCs are a high turnover sector and their funding cash for dollar collections cannot be subjected to taxes. An average BDC does over N30 million weekly turnover and paying taxes on such funds will affect their cash flow and ability to meet their statutory role of foreign exchange supply to the retail-end of the market.”

Other challenges before BDCs

The increasing difficulties arising from over regulation and complex documentation requirements that licensed BDCs are facing in carrying out their daily legitimate operation is more worrisome, as the hitches have negative impact on BDCs’ ability to comply with the statutory and regulatory requirements and have to be tackled by the apex bank.

For instance, six units within the CBN are involved with BDC regulations, supervision, licensing and monitoring. A BDC operator is expected to render daily, monthly, quarterly, half yearly and annual returns to the various departments of the same corporate body, which could be very cumbersome, repetitive and time-consuming for both the operator and the regulator.

The operators are also under obligation to render same returns to the Economic and Financial Crimes Commission (EFCC) /Nigeria Financial Intelligence Unit (NFIU) and at the same time, report to other statutory government establishments, including the FIRS and Corporate Affairs Commission (CAC), among others.

Gwadabe said: “These constitute multiple regulation of a unit of the financial sub-sector that is only involved as a small market player. Unfortunately, some operators have had to pay high penalties to different departments where instant regulations are violated.

“The result of this is heavy burden on the BDCs which have continued to challenge their operations. We urge the CBN to take critical look at these challenges and tackle them in the interest of the financial sector and economy.”

Capacity building for BDC operators

ABCON has for years been an active group in financial services sector, concentrating more on the BDC segment of the market and ensuring that global best practices are followed in BDCs operations.

On its own, the association has organised trainings for its members. It has also partnered with NFIU and the EFCC to build capacity for operators on how they tackle money laundering, terrorist financing and the benefits of keeping records of their transactions.

The ABCON chief said: “The anti-money laundering training that ABCON organised last month with NFIU in Lagos was meant to familiarise BDCs with the process of money laundering – the criminal business used to disguise the true origin and ownership of illegal cash – and the laws that make it a crime”.

“The NFIU/ABCON goal is to ensure that BDCs are not used to launder funds by Politically Exposed Persons (PEPs) especially at this period of electioneering. Their target was also to upscale BDCs’ compliance with the Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) for Banks and Other Financial Institutions in Nigeria, Regulations 2013.”

At the end of the training, BDCs were taught how to raise and submit both the Suspicious Transaction Reports (STRs) and Currency Transaction Reports (CTRs) to regulators.

Besides, ABCON will in the coming months partner with National Drug Law Enforcement Agency (NDLEA) to train BDC operators on how on record keeping and ways of tackling illicit financial flows into the country through BDCs.

BDCs roles in forex

According to Gwadabe, the BDCs have over the years, remained a potent monetary policy tool for exchange rate stability. The operators have helped the government in creating over 30,000 jobs for Nigerians, thereby reducing unemployment rate in the country. The BDCs have continued and will continue to make forex available to the critical retail end-users, thereby deepening forex access.

The BDCs have also been enhancing price discovery and transparency in the forex exchange market. The operations of BDCs have equally raised the level of investors’ confidence and Diaspora remittances in the country.

For instance, the World Bank data showed that Nigerians living abroad (Diaspora) sent home $22 billion in 2017, the highest in the sub-Saharan region and the fifth highest in the world. This represents 10 per cent increase when compared to the $19.64 billion sent home in 2016.

Gwadabe said the Diaspora remittance figures could double in few years if the CBN gives the BDCs all the necessary support as being requested.

He said: “While we commend the CBN for reviewing the rate at which the dollar is sold to BDCs thereby creating uniform competitive environment between the banks and BDCs, we also like Oliver Twist, ask for a better regulation that gives BDCs more time to concentrate on their core business of making forex available to retail-end users and attracting huge investment inflows into the domestic economy.”

Operators new demands

The ABCON has further put up new requests before the CBN, which are meant to further deepen liquidity in the market.    ABCON had urged the CBN to approve disbursements of the Renminbi (Yuan) to its members to deepen the China-Nigeria swap deal, following the implementation of the $2.5 billion currency swap agreement between the CBN and the People’s Bank of China (PBoC).

Gwadabe explained that the approval would enable BDCs sell Personal and Business Travelling Allowances (PTA/BTA) to its customers in Yuan.

According to him, the sale of BTAs and PTAs to China-bound businessmen would acquaint them with the authentic features of the Yuan to avoid being issued fake currencies for transactions.

The ABCON chief applauded the CBN for taking proactive measures in prosecuting the deal and the stability of the naira at the nation’s foreign exchange market.

He said the currency swap deal was part of the CBN’s plan to keep the naira stable and protect the foreign reserves domiciled in dollars. Gwadabe said the 15 billion Renminbi (RMB)/Yuan or N720 billion deal, would provide adequate local currency liquidity for Nigerian and Chinese industrialists and reduce difficulties they face in searching for the greenback.

The ABCON boss said BDCs would benefit from the swap deal given that a stable and strong naira is good for the economy and operators. For him, the increased use of Yuan in trade deals will also open a new business opportunity for BDC operators.

According to Gwadabe, ABCON will continually support CBN in achieving its exchange rate stability mandate and promoting economic growth through increased global partnerships and collaborations. He said the association is taking strategic steps to ensure that it benchmarks global best practices in currency dealings as seen in the ABCON co-ordination, automation and digitization projects.

The tough regulatory policies and environment, including the N70 million licencing fee for BDCs being championed by the CBN are source of concerns to ABCON. The fee, Gwadabe said, “is not only outrageous, but has reduced the funds available to BDCs to successfully run their operations.”

Other challenges being faced by the BDC include exchange rate, abnormal bank charges, Value Added Tax (VAT) and Commission on Turnover (COT), parallel market operators and illegal International Money Transfer Operators (IMTOs), porous international boarders, complex documentation requirements and poor capacity/ skills of operators.

The Nation

Banking & Finance

NGX: Foreign Investor Transactions Increase To $90.83m In April

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NGX: Foreign Investor Transactions Increase To $90.83m In April

 The total transactions by foreign investors on the Nigerian Exchange Ltd. (NGX) increased by 28.19 per cent between March and April.

The NGX revealed this in its Domestic and Foreign Portfolio Investment Report, which was made available to newsmen in Lagos.

The Exchange polls trading figures from market operators on their domestic and foreign portfolio investment (FPI) flows monthly.

NGX said that the figure rose from N94.26 billion, which is about 70.83 million dollars in March to N120.83 billion, which is about 90.83 million dollars in April.

The Exchange stated that the total domestic and foreign portfolio transactions in Nigeria’s equity market amounted to N346.23 billion in April.

However, as of April 30, 2024, the NGX said the total transactions at the nation’s bourse decreased by 35.71 per cent.

The figure dropped from N538.54 billion, which was about 404.69 million dollars in March to N346.23 billion, which was about 260.24 million dollars in April.

The regulator said the performance in April of the current year when compared to April 2023 which stood at N191.21billion, revealed that the total transactions increased significantly by 81.07 per cent year-on-year.

NGX mentioned that in April, the total value of transactions executed by Domestic Investors outperformed transactions executed by Foreign Investors by circa 30 per cent.

“A further analysis of the total transactions executed between March and April revealed that total domestic transactions decreased by 49.27 per cent from N444.28 billion in March to N225.40 billion in April.

“Also, Institutional Investors outperformed Retail Investors by 10 per cent.

“A comparison of domestic transactions in March and April revealed that retail transactions decreased by 54.89 per cent from N223.37 billion in March to N100.77 billion in April 2024,” it said.

According to the Exchange, the institutional composition of the domestic market decreased by 43.58 per cent from N220.91 billion in March to N124.63 billion in April.

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Equity Market Sustains Bullish Trend Amidst CBN-MPC Rate Hike

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Equity Market Sustains Bullish Trend Amidst CBN-MPC Rate Hike

 The equity market rose 0.11 per cent on Tuesday, amidst the Central Bank of Nigeria’s Monetary Policy Committee raising the policy rate to 26.25 per cent.

Notably, investors’ sustained buy interest in the banking and consumer goods sectors maintained the market’s upward trajectory.

The CBN-MPC on Tuesday increased the benchmark interest rate by 150 basis points to 26.25 per cent from 24.75 per cent set in March.

Mr Yemi Cardoso, CBN Governor, stated this at the news conference following the 295th MPC meeting of the regulator.

Cardoso said the apex bank retained the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45 per cent and put the Asymmetric corridor around the MPR at +100 and –300 basis points.

CBN further set the liquidity ratio of banks at 30 per cent

The CBN Governor attributed the third consecutive hike in bank interest rates in 2024 to continued efforts towards moderating inflation which reached 33.69% in April 2024 according to the National Bureau of Statistics (NBS).

Reacting, a stockbroker, Mr Victor Ibrahim said that investors did not react to the CBN-MPC decision because the hike in the monetary policy rate is targeted at tightening inflationary pressure as a result of the increase in the prices of goods.

Ibrahim told newsmen in an interview in Lagos, that the equity market does not have a direct correlation with the prices of goods, hence, the hike in the policy rate did not affect its performance.

He explained that though the decision of the CBN-MPC to control inflation was laudable, the apex bank needed to make decision that addresses both the monetary and fiscal policies to yield desirable results and curb the current inflation in the country.

According to him, investors did not also react negatively to the CBN-MPC decision because the stock market is just overcoming sentiments from the CBN directive on the Bank’s recapitalisation exercise.

The stock broker noted that the equity market is recently undergoing market reversal and share price correction, especially for the shares of banking stocks which has been greatly affected for some time.

“Investors are taking advantage of the reasonable price offer of stocks on the floor of the Exchange, especially the banking stocks, ahead of the bank’s recapitalisation deadline to acquire more wealth,” he said.

Meanwhile, the Nigerian Exchange Ltd. (NGX) market capitalisation gained N61 billion or 0.11 per cent to close at N55.597 trillion, as against N55.536 trillion recorded on Monday.

The All-Share Index which opened at 98,176.58 also advanced by 0.11 per cent or 109 points to close at 98,285.33.

Consequently, the Year-To-Date (YTD) return rose to 31.44 per cent.

Market breadth closed flat with 20 gainers and 20 losers traded on the floor of the Exchange.

On the gainers table, Berger Paints led by 9.96 per cent to close at N14.90, and Nestle trailed by 9.76 per cent to close at N900 per share.

Sovereign Trust Insurance gained 8.11 per cent to close at 40k, Royal Exchange added 7.14 per cent to close at 60k and Tantalizers rose by 6.38 per cent to close at 50k per share.

On the other side, International Energy Insurance led the losers’ table by 9.70 per cent to close at N1.49, Deap Capital Management and Trust Plc followed by 8.33 per cent to close at 44k per share.

UPDC Real Estate Investment Trust also lost 7.69 per cent to close at N1.20, WAPIC declined by 7.25 per cent to close at 64k and Sterling Nigeria shed 6.25 per cent to close at N4.20 per share.

Analysis of the market activities showed trade turnover settled lower relative to the previous session, with the value of transactions declining by 23.02.per cent.

A total of 222.90 million shares valued at N5.15 billion were exchanged in 7,228 deals, in contrast to 405.66 million shares valued at N6.69 billion were exchanged in 8,439 deals posted in the previous session.

Meanwhile, GTCO led the activity chart in volume and value with 40.64 million shares worth N1.62 billion, Access Corporation followed by 27.52 million shares valued at N469.13 million.

United Bank for Africa(UBA) sold 23.96 million shares valued at N502.44 million, Transnational Corporation traded 22.83 million shares valued at N260.68 million.

Also, Jaiz Bank transacted 11.55 million shares worth N24.30 million.

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Banking & Finance

Investors Lose N132bn As Dangote Sugar, PZ Cussons Nigeria lead Losers table

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Investors Lose N132bn As Dangote Sugar, PZ Cussons Nigeria lead Losers table

The stock market recorded a downturn, resulting in a loss of N132 billion in investors’ wealth on the Nigerian Exchange Ltd. (NGX).

This negative trend was primarily driven by sell-offs in Tier-one banking stocks, such as Zenith Bank, FBN Holdings, and United Bank of Africa.

Apart from Tier-one banking stocks, Wema Bank, Sterling Bank, FCMB, Dangote Sugar, and PZ Cussons, among others pulled down the market on a negative note.

Consequently, the market capitalisation of the NGX declined to N55.132 trillion from N55.264 trillion, marking a decrease of N132 billion.

The All-Share Index also dropped by 0.24 per cent, losing 235 points to settle at 97,473.98 from an opening of 97,708.74.

Year-to-date (YTD) figures fell to 30.36 per cent, reflecting the overall negative sentiment prevailing in the market.

However, the market breadth closed positive with 22 gainers and 20 losers.

LearnAfrica and Tantalizers led the gainers’ table by 10 per cent each, closing at N3.63 and 55k per share, respectively.

McNichols Plc followed closely with a gain of 9.89 per cent, while Regency Alliance Insurance and Cutix advanced by 9.38 per cent and 8.33 per cent, respectively.

On the flip side, Dangote Sugar, PZ Cussons Nigeria, and The Initiates Plc experienced the biggest losses, each dropping by 10 per cent to close at N40.50, N22.50, and N2.25 per share, respectively.

NEM and Caverton also saw significant declines of 9.66 per cent and 9.55 per cent, respectively, closing at N9.35 and N1.24 per share.

The trade turnover settled 48.90 per cent lower than the previous session.

A total of 306.60 million shares valued at N5.81 billion were transacted in 7,951 deals, in contrast to 439.10 million shares valued at N11.38 billion in 8,607 deals traded on Monday.

Access Corporation led the activity chart in volume with 33.23 million shares valued at N575.59 million.

GTCO followed to lead the chart in value chart with 32.25 million shares worth N1.36 billion.

Nigerian Breweries sold 27.46 million shares worth N631.76 million and UBA traded 22.52 million shares valued at N519.50 million.

Also, Royal Exchange Plc transacted 19.46 million shares worth N10.18 million. 

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