GTCO, Fidelity, FCMB Gain N390bn from Forex Reform as Naira Depreciates
- Three Nigerian banks gained from the Naira fall with most of their net foreign asset positions in US dollar
- GTCO, Fidelity, and FCMB gained N357.47 billion, N32.16 billion and N921.78 million in FX income
- Analysts said some banks were not affected by the losses because their major FX was in assets and not liabilities
Over the past six months, the naira has lost roughly 60% of its value against the US dollar.
But three Nigerian banks, GTCO, Fidelity, and FCMB with sizable net foreign asset positions are benefiting from the decline.
This comes amid changes in the Nigerian foreign exchange market announced by the Central Bank of Nigeria (CBN) on Wednesday, June 14, 2023.
The development meant that all forex transactions were done through the Investors and Exporters (I&E) window, which abolished the country's parallel and other forex markets.
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FX by each bank
The largest FX income was recorded by GTCO, which increased by 19,016 percent to N357.47 billion. Fidelity Bank came second with a 2,030 percent increase to N32.16 billion. FCMB's income also increased by 65.2% to N921.78 million.
According to BusinessDay Analysis, banks with favourable net exposure to the dollar benefited from the fall of the naira by realising exchange rate gains.
Tesleemah Lateef, a banking analyst at Cordros Securities Limited, said the devaluation of the naira caused a rise in foreign exchange income for Nigerian banks in the first half of 2023.
Some companies recorded FX loses
Meanwhile some companies in the telcos, FMCG sectors recorded FX losses in the first half of the year.
Legit earlier reported that manufacturers project massive job losses over forex shortage, high energy costs, and other factors.
Speaking on the development, Olumide Adesina, a financial analyst, said this was because most companies particularly in the FMCG and Telcos had significant liabilities in FX.
Adesina said that this could lead to an increase in the cost of consumer products and layoffs in order to tame high operational expenses.
Explaining why some banks were not affected by the losses, he said:
“Banks major FX were in assets not liabilities because they had a net long position and benefited hugely from the revaluation of the naira”
Meanwhile, Fitch Rating, a global credit rating organisation, predicted that despite currency gains, Nigerian banks would experience a rise in impaired loans as growing inflation and interest rates put a strain on borrowers' ability to pay back their debts.
Fitch claims Tinubu's significant changes have enhanced the nation's credit in general.
The devaluation of the naira and the end of fuel subsidies, according to Fitch Ratings, would lead to higher short-term inflation and tighter monetary policy, both of which would limit economic growth.
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Source: Legit.ng
