CBN Plans Special Window For Dividend, Investment Remittances

• Sells $200m to SMEs, Spot Wholesale

In its bid to further boost foreign exchange supply in the country, indications emerged Tuesday that the Central Bank of Nigeria (CBN) may be toying with the idea of opening a special window for investors to trade freely for certain eligible transactions particularly dividends and investment remittances.
It would be recalled that the inability to repatriate capital invested in the country has remained a major hindrance to free-flow of Foreign Direct and portfolio Investment for some time, which had worsened supply of the green-back for several months.
On February 2, 2017, the Nigerian Stock Exchange (NSE), corroborated a report by the National Bureau of Statistics (NBS) a day earlier that there was a huge 49.51%, or N507.52bn decline in foreign portfolio investments, from N1.025 trillion in 2015 to N517.55bn last year. In the period, domestic transactions also decreased by 28.02% from N880.56bn to N633.82bn within the same period.
With portfolio investment, investors only seek quick returns on their investment, rather than control of management in companies.
The NBS had in its Nigerian Capital Importation- Q4 2016 Report, indicated that capital importation, comprising Foreign Direct Investment, Portfolio and other investment fell by 46.86% from $9.64bn in 2015 to $5.12bn, following what some analysts blamed on inability of investors to repatriate their funds out of Nigeria.
Sources close to the CBN hinted of a soon to be opened special window for investors to trade freely for certain eligible transactions particularly dividends and investment remittances, in addition to beginning spot forex auction sales to ensure availability of the currency as part of efforts to stabilize the Naira’s value.
As part of this resolve, the apex bank made $100m spot sale to Small and Medium Enterprises (SMEs) in the country involved in the importation of critical and eligible finished and semi-finished goods on Tuesday, April 11, 2017, through its newly opened Forex window announced a day earlier.
Also on Tuesday, the CBN released results of its 7 – 30-day forwards wholesale of $100m, even as authorized dealers subscribed fully to the $100 million offered by the CBN at the forex auction in the interbank wholesale window on Monday, April 10, 2017.
Fielding questions from newsmen on Tuesday, Acting Director, Corporate Communications at the CBN, Isaac Okorafor, said the new window for SMEs provides small scale importers opportunity to source forex and boost their businesses by importing eligible finished and semi-finished items.
Such purchases, he said, is limited to $20,000 per SME, quarterly.
He reiterated the CBN’s capacity to sustain the current rate of liquidity in the market, even as some experts agree that the CBN has the capacity to sustain supply even if it has to keep doing so for the next three months, going by the nation’s current $30bn foreign reserves. Other factors that would help include: the accretion from oil revenues and the subdued level of demand. They recalled that last September, for example, the Bank survived with a reserve level as low as $24bn, reasoning that the gap between that and current levels stands at over $6bn, an amount that can sustain the market for a long time, coupled with ongoing steady accretion from global oil prices.

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