Business

Binance will discontinue all services for Nigeria’s fiat currency, the naira, amid an ongoing regulatory conflict in the country.

The crypto exchange will automatically convert naira balances to USDT from March 8 at 8:00 a.m. UTC but will cease support for NGN deposits after 14:00 UTC today. Withdrawals will become unsupported after March 8 at 6:00 a.m. UTC.

Posting on its website on Tuesday, Binance said the conversion rate for automatic conversions will be 1 USDT per 1,515.13 naira, according to an announcement.

All spot trading pairs against the naira will be delisted on March 7 at 3:00 a.m. UTC. Open spot orders for these pairs will be automatically closed.

Binance Convert, Binance P2P, the exchange’s Auto Invest feature, and Binance Pay will also cease support for the naira at various dates and times.

The foreign exchange crisis worsened on Thursday as the local currency further depreciated, exchanging at N1,600 to a dollar at the parallel market, findings by Daily Trust have shown.

This was coming a few days after the local currency hit an all-time low at the official market, crossing N1,500 to one dollar.

The naira has come under a very severe attack in recent times, defying several interventions by the Central Bank of Nigeria (CBN) thereby worsening the cost of living crisis and inflation in the country.

Our correspondent reports that the naira has depreciated by over 50 per cent in the last five months.

Recall that the dollar first hit N1,000 in the parallel market in September 2023. It oscillated within that rate until the New Year when it started experiencing a free fall.

The depreciation of Nigeria’s currency is despite the federal government receiving a $2.25bn foreign exchange support from the AfreximBank as well as the offset of part of the unsettled forex obligations.

The CBN had also initiated a series of measures in recent times in a bid to stop the free fall of naira.

But the currency appears to be defying the various interventions as it depreciated further on Thursday at the parallel market amidst the decline in forex turnover.

The UK economy has slipped into recession as households cut back on spending in response to soaring interest rates and rising cos of living.

The Office for National Statistics (ONS) said gross domestic product (GDP) fell by a larger than expected 0.3% in the three months to December after a decline in all main sectors of the economy and a collapse in retail sales in the run-up to Christmas.

It followed a drop of 0.1% in the third quarter, confirming a second consecutive quarter of falling national output – the technical definition of a recession.

According to the UK Guardian, the official confirmation of a recession is a blow to the government with an election less than a year away and will embarrass Rishi Sunak, after the prime minister made growing the economy one of his five priorities for government at the start of last year.

Rachel Reeves, the shadow chancellor, said: “Rishi Sunak’s promise to grow the economy is now in tatters. The prime minister can no longer credibly claim that his plan is working or that he has turned the corner on more than 14 years of economic decline under the Conservatives that has left Britain worse off.

“This is Rishi Sunak’s recession, and the news will be deeply worrying for families and business across Britain.”

The ONS said growth over the course of 2023 as a whole was estimated at 0.1%, the weakest year since 2009 during the financial crisis, excluding the economic collapse in 2020 during the Covid pandemic.

The director of economic statistics at the ONS, Liz McKeown, said: “Our initial estimate shows the UK economy contracted in the fourth quarter of 2023. While it has now shrunk for two consecutive quarters, across 2023 as a whole the economy has been broadly flat.

“All the main sectors fell on the quarter, with manufacturing, construction and wholesale being the biggest drags on growth, partially offset by increases in hotels and rentals of vehicles and machinery.”

Economists had widely expected a shallow recession at the end of last year as households came under pressure from higher borrowing costs and rising prices for everyday essentials, forcing cutbacks elsewhere.

Widespread strikes across the economy and heavy rainfall also dampened activity.

More recent snapshots from the economy have, however, shown a rebound in consumer confidence since the start of this year, buoyed up by the prospect of interest rate cuts from the Bank of England as inflationary pressures cool.

Andrew Bailey, the Bank’s governor, this week downplayed the significance of the quarterly GDP figures, suggesting there were signs of an “upturn” in the economy that would become clearer in the months ahead.

The chancellor, Jeremy Hunt, said: “High inflation is the single biggest barrier to growth, which is why halving it has been our top priority. While interest rates are high – so the Bank of England can bring inflation down – low growth is not a surprise.

“But there are signs the British economy is turning a corner. Forecasters agree that growth will strengthen over the next few years, wages are rising faster than prices, mortgage rates are down and unemployment remains low. Although times are still tough for many families, we must stick to the plan – cutting taxes on work and business to build a stronger economy.”

However, the latest snapshot from the ONS indicated weakness across much of the economy at the end of last year, with a fall in GDP amid a tough Christmas shopping period for retailers, strikes by junior doctors, and heavy rainfall.

Reflecting on pressure on household spending amid the cost of living crisis, the ONS said output in the UK’s dominant services sector had fallen for three consecutive quarters, with a drop of 0.2% in the last three months of 2023.

Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, said: “Though the shallowness of this recession provides comfort, these figures also confirm that our economy remained locked in a cycle of persistent stagnation throughout 2023 as a myriad of headwinds, including high inflation, weighed heavily on activity.”

The exchange rate between the naira and dollar closed at N1,534/$1 on the official NAFEM market on Monday, February 12th, 2024.

This is the weakest ever the naira has fallen against the dollar at closing on the official market.

The intra-day high and low also hit N1,550 and N1,000 against the dollar as Nigeria continues to slide on the back of central bank reforms towards a free market exchange rate.

This is a developing story….

The Central Bank of Nigeria (CBN) has uncovered a $2.4 billion scam involving false foreign exchange claims that have put pressure on the naira and spooked the currency market, Governor Yemi Cardoso revealed on Monday.

The discovery came to light after an audit by Deloitte, a consulting firm hired by the CBN to investigate the claims. The audit, part of a broader effort to make the CBN’s accounts transparent, exposed a $7 billion backlog of unmet dollar demand from investors and businesses. This “overhang,” as Cardoso called it, threatened to further weaken the naira against the dollar.

Cardoso, who was interviewed on Arise TV, explained that the Deloitte investigation revealed that $2.4 billion of the claims were entirely bogus. In some cases, claimants couldn’t produce valid import documents, and in others, the companies claiming the funds didn’t even exist.

“We had had reasons to believe we needed to take a harder look at these obligations. So we contracted Deloitte management consultants to do a forensics of all these obligations and to actually tell us what was valid and what was not,” Mr Cardoso said.

“The result that came out of this was startling in a great respect. It was startling. We discovered that of the roughly $7 billion, about $2.4 billion had issues, which we believe had no business being there and the infractions on that ranged from so many things, for example not having valid import documents and in some cases entities that do not exist.”

The discovery of the backlog follows the audit of CBN accounts after seven years of concealment.

The Bola Tinubu-led federal government, through the Central Bank of Nigeria (CBN), has increased the exchange rate for cargo clearance from N952 per dollar to N1.356 per dollar.

This adjustment follows recent increases in the exchange rate for cargo clearance, reflecting a continuing trend of fluctuations in the country’s foreign exchange policies.

The exchange rate for cargo clearance was initially raised from N757 per dollar to N783 per dollar in November, representing a 3.4% increase.

Subsequently, it was further increased to N952 per dollar in December.

According to Punch newspaper, the rate has now been adjusted to N1.356 per dollar.

Members of the Association of Nigerian Licensed Customs Agents and other stakeholders have expressed concerns over the frequent changes in exchange rates, emphasizing the potential impact on the cost of clearing and, subsequently, on commodity prices.

According to them, the adjustments could also have broader implications for importation and exportation activities, influencing trade dynamics in the country.

A member of the Association of Nigerian Licensed Customs Agents, Remilekun Sikiru, said, “How do we explain this? From N952/$ to N1.4/$ as of Friday morning with about N404 increase?

“It’s quite unfortunate that the prices of goods and commodities will automatically increase. Importation would further decrease and depreciate; vehicle prices would skyrocket again.

“Since this unification of a thing, the government has refused to look inward and critically into the maritime industry as regards importation and exportation.

“The sector have been neglected and things are getting worse daily. The question now is, how would freight forwarders and customs brokers agents cope with this new rate?”

Also speaking, an agent, Ben Anya, said that they woke up to the new rate, “which was before now set at N951 per dollar,”

Anya explained that with the latest increase in the exchange rate, the cost of clearing would increase.

“And this would also affect the cost of goods in the market. It would also lead to a drop in importation,” he said.

Amid its fresh moves to stabilise the nation’s volatile exchange rate, the Central Bank of Nigeria has ordered Deposit Money Banks to sell their excess dollar stock latest February 1, 2024.

The CBN, which made the disclosure in a new circular released on Wednesday, also warned lenders against hoarding excess foreign currencies for profit.

According to officials, the central bank believes some commercial banks hold long-term foreign exchange positions to enable them profit from the volatile movements of exchange rates.

The new circular introduces a set of guidelines aimed at reducing the risks associated with these practices.

In the circular titled, “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks”, the CBN raised concerns over the growing trend of banks holding large foreign currency positions.

The latest circular came barely 48 hours after the CBN released a circular, warning banks and FX dealers against reporting false exchange rates, among others.

The new development also came on the heels of the adjustment of the methodology used for the calculation of the nation’s official exchange rate by the FMDQ Exchange.

The review has pushed the Nigerian Autonomous Foreign Exchange Market rate (official exchange rate) from approximately N900/dollar to N1,480/dollar. The naira closed at 1,450/dollar at the parallel market on Tuesday.

The move which is aimed at unifying the official and parallel market exchange rates has been hailed by economists and other stakeholders.

They however challenged the CBN to clear FX backlogs estimated at over $5bn and also fund FX demands at the official market. This, they said, would forestall a situation whereby the parallel market rate would move away from the official rate again.

Apparently as part of the moves to fund FX request at the official window, the CBN in its latest circular released on Wednesday accused banks of holding excess foreign exchange positions.

As a result, the central bank gave lenders until February 1, 2024 (today) to sell off excess dollar positions.

The circulated, dated January 31, 2024, was signed by the Director, Trade and Exchange, CBN, Dr. Hassan Mahmud, and representative of the Director, Banking Supervision, CBN, Mrs. Rita Sike.

The circular read in part, “The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”

To address these issues, the CBN in the circular issued prudential requirements that banks must follow. A key focus of these requirements is the management of the Net Open Position (NOP).

The NOP measures the difference between a bank’s foreign currency assets (what it owns in foreign currencies) and its foreign currency liabilities (what it owes in foreign currencies).

The circular mandates that the NOP must not exceed 20 per cent short or 0 per cent long of the bank’s shareholders’ funds.

This calculation, the apex bank said, must be done using the Gross Aggregate Method, which provides a comprehensive view of the bank’s foreign currency exposure.

Furthermore, banks with current NOPs exceeding these limits are required to adjust their positions to comply with the new regulations latest by February 1, 2024.

Additionally, banks must calculate their daily and monthly NOP and Foreign Currency Trading Position (FCT) using specific templates provided by the CBN

The Senate on Wednesday, January 31, summoned the Governor of the Central Bank of Nigeria (CBN), Dr. Olayemi Cardoso, to appear before it on Tuesday next week over the state of the economy and free fall of the Naira.

The Chairman of the Senate Committee on Banking, Insurance, and Other Financial Institutions, Senator Tokunbo Abiru (APC- Lagos East), handed down the summon after the panel met in Abuja.

Speaking with reporters after the emergency meeting of the Committee held behind closed doors, Abiru said the state of the nation’s economy, especially the inflation index was of great concern to the Senate.

Abiru said: “We have held a meeting this afternoon essentially to focus on the direction of the Nigerian economy.

“We are all living witnesses of what is going on. Underlining the major issue of the economy is the way the inflation index has been and of course, it is a major concern to us.

“We have deliberated among ourselves. Critical issues were addressed and we believe that the next line of action is to summon the Governor of the Central Bank of Nigeria on Tuesday at 3 pm to brief us properly on the state of the economy.

“That we have resolved and will communicate to the Governor of the Central Bank after which we will have further communication with members of the press.”

The Naira was said to have plummeted to about N1,500.00 to the US dollar as at the time of filing this report.