How Nigeria banks made billions from Naira devaluation

By Odunewu Segun

While the devaluation and the ensuing failed forex polices of the CBN wreaked havoc across the economy, the banking sector has greatly reaped from the dwindling value of the Naira, National Daily investigation has revealed.

For most Nigerian banks, the devaluation of the Naira has been a blessing in disguise. Whilst banks incur increased provisioning on bad loans, the risk is mitigated by even higher gains in exchange rate gains.

For instance, GT Bank reported a record N132 billion profit after tax for the year ended December 2016. However, included in that profit is a massive exchange gain of N87.8 billion up 17 folds from the N5.1 billion reported a year earlier.

This is also not the first time, GTB is reaping heavily from the benefits of devaluation. In 2014, when the CBN devalued the naira, the bank saw its foreign exchange gain rise 2.6 folds to N28.2bn. But this is still nowhere close to the N87 billion earned in 2016.

Also another tier one lender, Access Bank, just like many other commercial banks, recorded a profit before tax of N90.3 billion in its recently released audited results for the full year ended 31 December, 2016, accounting for a 20 per cent increase over the same period in 2015.

Many therefore wonder how only the banking sector have continue to post huge profits while the manufacturing, aviation and other sectors continue to struggle to stay afloat over the dwindling value of the naira.

Investigations show that before the Central Bank of Nigeria changed the forex rules in 2016, thousands of helpless importers who were in desperate need of forex to import products are milked on weekly basis by some of these banks.

It was gathered that commercial banks sold millions of dollars obtained from the CBN on their clients’ names at huge premiums above the official rate approved by the apex bank

National Daily gathered that before the new rule, out of about $10m to $25m (depending on the volume of demand by its customers) sold by the CBN to commercial banks in some weeks, illegal profit to the tune of $5m could be made by each of the banks involved in the forex racketeering.

In other to stop this unwholesome practices, the CBN mandated the banks to start publishing their returns on the utilization of the forex allocated to them in the newspapers.

On February 20, the Central Bank of Nigeria (CBN) put in place a new foreign exchange (Forex) which has so far saw the apex bank boosting the forex market about $1.2 billion in just three weeks to help strengthened the naira.

The bank said it took the decision to make foreign currency exchange easier for Nigerians and reduce the stress often caused by currency hoarders and speculators.