By Babajide Komolafe
The nation’s currency, the naira suffered heavily last week against the United States dollar, losing 150 kobo at the official market owing to upsurge in demand, which crossed the $900 million mark.

Meanwhile, intense scarcity of funds, aggravated by outflows through payment for foreign exchange purchases and treasury sale by the Central Bank of Nigeria (CBN) caused interbank interest rate to rise significantly.

EXCHANGE RATE
From N148.5 per dollar the previous week, the official exchange rate rose to N150.01 per dollar last week, indicating 151 kobo depreciation.

The depreciation was occasioned by rising demand, attributed to pile-up demand as a result of the two weeks end-of-year closure of the official market. Last Monday, demand rose by 12 per cent to $436.527 million as against $389.249 million the previous week. The CBN, however, sold $300 million, 20 per cent more than it did last week.

The increased demand also occasioned  30 kobo depreciation of the naira at the official market as the official exchange rate rose to N149.8 from N149.5 per dollar.

At the interbank market, the naira fell by 53 kobo as the interbank exchange rate closed at N152.8150 per dollar from N152.2775 the previous week.   It however, fell by 26 kobo to N152.56 per dollar.

On Wednesday, demand rose marginally by 6.1 per cent to $464 million, while the apex bank sold N350 million. As a result, the official exchange rate rose further by 51 kobo to N150.01 per dollar. The interbank market rate also rose to N152.72, and continued to rise closing the week at N153.7025 per dollar, indicating 142 kobo depreciation for the dollar in the interbank market during the week. Operators however, opined that the apex bank would increase foreign exchange supply to forestall further rise in the official rate.
INTER BANK INTEREST RATE
Interbank interest rate rose persistently during the week due to outflows through payment for foreign exchange purchases at the official market and treasury bills sale by the CBN. The ensuing scarcity of funds was aggravated by the lack of fresh inflow into the market.

On the average, cost of funds rose by 143 basis points (1.43 per cent). Interest rate on Call lending  rose to 3.34, Seven Days to 1.96, 30 Days to 0.7, 60 Days to 0.92, and 90 Days to 0.25 per cent. The rates are however expected to fall this week due to inflow of funds from the release of statutory allocation to the three tiers of government.

AMCON  to issue  N10bn  bonds
During the week, the Asset Management company of Nigeria (AMCON) disclosed it will issue another $3 billion (N10 billion) worth of bonds  to up remaining bad bank loans by March 31. Chief Executive Mustapha Chike-Obi said AMCON had issued three-year zero-coupon bonds with a face value of 1.03 trillion naira to 21 banks  in December in exchange for non-performing loans, paying out a discounted total of 770 billion naira.

He said margin loans accounted for about 40 per cent of the total non-performing loan purchase. “We are going to clear up everything by March 31 and at that point, we would have issued proper bonds, fully tradeable,” Chike-Obi told Reuters. “I think we will be spending around 500 billion naira more.”

BANKING SECTOR RESOLUTION COST SINKING FUND
Last Friday, the Central Bank of Nigeria (CBN) and the 24 banks signed the Memorandum of Understanding to establish a sinking fund for AMCON. The Fund known as Banking Sector Resolution Cost Sinking Fund, is to be jointly financed by the CBN and the banks.

For ten years, the apex bank would contribute N50 billion annually while each bank would contribute 0.03 per cent of its asset base.

CBN Deputy Governor, Financial Sector Surveillance, Dr Kingsley Moghalu said “The CBN and the 24 Nigerian banks (Participating Banks) realized that funds from the management and realization of the eligible bank assets to be acquired by the Asset Management Corporation of Nigeria (AMCON) might turn out to be insufficient to meet the resolution cost of restoring financial stability.

Therefore, they resolved, in the national interest, to establish a Banking Sector Resolution Cost Fund to meet any shortfalls and to ensure financial stability and the soundness of the banking system.”

THREE BANKS DISCLOSE AMCON LARGESSE
Three banks namely: Union Bank, Intercontinental Bank and Wema Bank disclosed their share of the N1.01 trillion bond for bad debt largesse from AMCON. Union Bank disclosed it received N234 billion, Intercontinental received over N164 billion while Wema Bank got N15.2 billion. The bank expects additional bonds from AMCON in the subsequent  phases.

UBA OFFERS N1BN  LOAN TO OSUN STATE
UBA  announced the  readiness of the bank to extend a billion naira loan to the Osun State Government, to be accessed by farmers in the state, under the Commercial Agriculture Credit Loan Scheme (CACS) and also extend financial support towards construction of independent power projects in the state. The bank made its intention known on Tuesday during a visit by the UBA  management team led by the Managing Director/CEO, Mr. Phillips Oduoza to Governor Rauf Aregbesola of Osun State, at the government House.

DIAMOND BANK UNVEILS TARIFF GUIDE
Diamond Bank, in keeping with its tradition of being upright and transparent in its operations,  published its tariffs and service fees for all its products and services to show that there are no hidden charges in all its transactions. The Tariff and Service Fees publication is a guide for customers indicating the applicable charges for every product and service offered by the bank.