BY BUKOLA IDOWU, Lagos –
With increased stability in the Nigerian foreign exchange (forex) market, deposit money banks in the country continue to reap the gains of the market as they made N149 billion through forex trading in the nine months period that ended September 30, 2017.
The Central Bank of Nigeria (CBN) had introduced a more flexible forex policy earlier in the year after the value of the Naira hit rock bottom, amidst calls for a convergence of rates in the country.
Presently the Naira sells at different rates on at least five platforms. At the official window, the interbank market, the Naira sells for N305 to the Dollar while banks sell to customers at N360; and Bureau De Change (BDC) operators sell for N362 to the Dollar. At the Investors’ and Exporters’ (I&E) window the Naira sells for N360.31 while it goes for N363 at the parallel market.
While the CBN says it is working towards rates convergence, banks continue to accrue gains through forex tradings and investment in government securities. As deposits and loan books moderate, banks are looking towards buffing up their income from available sources.
The managing director and chief executive of Afrinvest West Africa Limited, Ike Chioke noted that banks are in business to make profit, alongside their role of financial intermediation.
He explained that with rates at the fixed income market being more attractive with lesser risk, banks naturally would gravitate towards where they can make more money: “If I can make almost 20 per cent gain that is tax free and comes at a lower cost and risk, why will I go and put money where I will have a net gain of about 22 per cent with a higher risk?”
A look at the nine months results of DMBs released so far showed that most of them, including the tier two banks, are playing more in the foreign exchange and fixed securities market: Guaranty Trust Bank which posted a Profit After Tax (PAT) of N125.57 billion in the nine months period earned a forex income of N7.24 billion compared to N2.47 billion which it made from forex tradings in 2016.
Its income from trading in fixed securities rose to N2.69 billion from N538.51 million which it made in 2016. GTB had during the period under review saw a decline in its deposit base from N1.986 trillion as at December 2016 to N1.897 trillion, as its loan book shrank to N1.428 trillion from N1.589 trillion.
Zenith Bank’s nine months financial statement revealed that while deposits increased to N3.06 trillion from N2.98 trillion, its loan book reduced from N2.289 trillion to N2.155 trillion. The Bank’s investments in forex tradings, however, earned it more income in the period under review as income from that source rose to N28.78 billion from N11.78 billion while investments in fixed securities brought in an income of N53.02 billion, up from N4.63 billion made in the comparable period of 2016.
Likewise, United Bank for Africa (UBA) which grew its deposit base and loan book slightly during the year, had made an income of N28.94 billion from foreign exchange tradings and another N8.24 billion from investments in fixed income securities.
UBA’s loan book had grown to N1.549 trillion from N1.5 trillion while its deposits rose to N2.519 trillion from N2.48 trillion. The bank had recorded a N60.92 billion PAT at the end of the nine months period.
Sterling Bank also, which recorded a PAT of N5.90 billion during the nine month period, made a gain of N1.863 billion from forex tradings and another N557 million from fixed income securities.
Despite a drop in the Bank’s deposit base from N584.73 billion to N554.47 billion, Sterling Bank had increased its loan book to N557.44 billion from N468.25 billion.