Banks to prioritise FX allocation for real sector, as demand soars

Bank executives rose from their monthly industry meeting on Thursday with a firm agreement to seriously downplay foreign exchange access to invisibles -school fees, medical bills abroad- but rather to concentrate on allocating FX for those ventures that would boost the real sector.

Herbert Wigwe, managing director, Access Bank who, alongside his colleagues and Central Bank officials briefed on the outcome of the Bankers’ Committee Meeting in Abuja, noted huge FX demand pressure for schools fees and medical bills which is already crowding out allocation to those critical transactions that would boost the economy.

“We focus on the real sector in respect to supporting most of the manufacturers concerned, particularly those that utilise local raw materials for production. At the point where the economy is now, we need to look for how to stimulate production to be able to provide goods and services to people at minimal cost,” Wigwe said.

He added that such FX demand has become a serious concern and drag on the lean resources and that as at today, demand for school fees payment alone has averagely reached 15 percent of all FX given to the banks.

“…the figures are staggering and mean there is a potential demand of $20 billion annually or perhaps a bit more. Even if $5 billion, it is unbelievable,” Wigwe lamented.

“We find different pressures from different banks in terms of FX demand but generally never below 15 percent of the demand of the current foreign exchange that is being given to the banks. That, by any stretch of imagination is significant”. He said deliberations at the meeting focused so much around the FX issue and that even though the bank executives did not agree on the final position, “one thing was clear…that we should not allow this demand to crowd out real sector investment.”

Wigwe wondered “why we can’t revisit the educational system and make sure our children go to school locally. Why can’t we we revisit the health sector.

“Why must we spend so much allowing people spend money on children’s school fees oversees or medical tourism,” he queried.

Bola Adesola, MD Standard Chartered Bank who also briefed on the outcome of the meeting, emphasised that they were not taking these decisions lightly because there are implications and considerations before such agreement.

Her words, “I think that the watch word is really belt tightening and we should focus on raw materials and the real sector, despite the pain that we may need to go through today, short term so that we can have long term development.

“So our discussion around that was how we could prevent or reduce the crowding out of the real sector where there is increased demand on the invisibles front.”

She noted that the key thing was to be truthful that the FX demand has far exceeded supply, as she called the issues “elephants in the room that have to be dealt with” ,noting, “We have to take those hard decisions today.”

Agnes Tokunmbo Martins, CBN Director, banking supervision, said another major issue discussed at the meeting was that of financial inclusion which, has moved up from around 40 percent to 66 percent.

“I am happy to report that there has been substantial improvement. A couple of years back, the number of Nigerians that were financially excluded was between 30 and 40 percent but currently we have 66 percent of Nigerians financially included, that’s about 57 million Nigerians.

“ We are working on a target of 68.5 percent by the end of December 2016. If that target is achieved, I think we can say we have gone a long way to alleviate the sufferings of Nigerians as far as financial inclusion is concerned,” Martins, who also briefed the media stated.

Uzoma Dozie, MD Diamond Bank, on his part said that a critical thing that the committee is doing is to drive financial literacy and that it is an aspect that they have agreed to take on seriously this year, to enable customers know for instance, what they are being charged for.

Onyinye Nwachukwu & Kehinde Abdulsalam