Over the weekend, the Central Bank of Nigeria (CBN) in a meeting with the Bankers’ Committee, comprising mainly of chief executives of banks, dealt with the impact of Covid-19 on the banking system in particular and the economy in general.
The committee discussed the significant health and economic crisis caused by the novel coronavirus, which has resulted in escalating worldwide infections, deaths, disruptions in global supply chains, travel restrictions and turmoil in the international financial markets.
The committee agreed that profit will not be the primary motive at this time; rather, preserving confidence, financial stability and support for the economy will be the overriding objective.
Godwin Emefiele, governor of the CBN, who presided over the meeting, said engagements would be held with correspondent banks, trade creditors, trading partners regarding existing Letter of Credit (LC) and trade commitments. The industry is committed to resolving these commitments in a comprehensive and orderly way.
At the extra ordinary bankers committee meeting Emefiele said the exchange rate of N380 per dollar at the Investors and Exporters (I&E) forex window was not devaluation but an adjustment.
“CBN has a responsibility to see to adjustment in currency. What you have seen is an adjustment in currency. We have also been accused that we have a hand. We don’t have a hand,” Emefiele said.
The CBN on Saturday devalued the Naira as official exchange rate is now at N360 per dollar. The official rate which stood at N307 per dollar as at Friday is now pegged at N360 according to data from the CBN website.
Akintunde Olusegun, financial market analyst at Polaris Bank Limited said the devaluation was long expected even though the CBN has always maintained it will not. The impact of corona virus pandemic coupled with the oil price war that ensued between Saudi Arabia and Russia more than halved oil prices, putting pressure on the already stressed foreign reserve and casting doubt on the apex body resolve to continue the defence of the Naira.
It will have a negative downside impact on headline inflation as a result of its expected impact on the price of imported goods and raw materials (cost push inflation). Nigeria is still more of imported goods consuming nation than producer. The impact will be directly felt by Nigerians paying children school fees of students abroad as well as all outbound vacation and medical tourism.
However, the moving of the official rate to N360/$ will cushion the effect of drop in revenue on state governments in Naira terms as the new conversion rate will be in favour of Federation Accounts Allocation Committee (FAAC) allocation, he said.
“I expect more combined policies from both fiscal and monetary authorities around import substitution and backward integration. Urgent structural reforms are needed at this time to support local production and consumption and to attract the much needed Foreign Direct Investments (FDIS)”.
The devaluation is not all negative, he said, adding that exporters will benefit in terms of conversion of their dollar earnings to Naira and the affordability of exports product to international buyers as a result weak Naira will bring more patronage.
Nigerian banks on Monday restricted access into banking hall by customers for fear of contact with coronavirus, which is rapidly spreading across the globe.
These banks are located at Ikeja and Ojueledge areas of Lagos State and they include First Bank of Nigeria, FCMB,
Gtbank, Fidelity Bank, Access Bank, Ecobank, and Zenith Bank among others.
Investigation shows that customers queued in large numbers outside the bank as they were being directed to go to the Automated Teller Machines (ATMS) for withdrawals.
“We have been here since morning, before they opened the bank. Our attempt to get inside the banking hall was denied by the security men; instead we were directed to the ATM stand,” one of the customers at Zenith Bank at Mushin, Lagos said.
Access Bank in a note to customers said, “We have put in place a robust business continuity management programme that will ensure minimal business disruption and mitigate any potential negative impact. We are preparing alternate locations for key functions to ensure continuity should there be any disruptions in our primary locations. We are working hard to scale our IT systems to support the expected increase in mobility that would be required to operate efficiently and respond to our customer needs during this period”.