Only Seven Banks Would Qualify To Be Forex Primary Dealers

forex

As the floating currency system officially starts today, the Central Bank of Nigeria, CBN will be naming Forex Primary Dealers, FXPDs.

FXPDs are authorised banks that will be allowed to act as the dealers with the CBN on large trade sizes on a two-way quote basis. Based on the strict condition that the CBN laid down, Nigeria is likely to have just about seven banks that will qualify for this coveted business status.

According to the CBN rule, for any bank to be authorised as a FXPD, such bank must have a minimum of NGN400 billion in total FX assets. The second condition is that such bank must have a minimum shareholders fund not battered by debt and impairment of at least NGN200 billion. Finally, the bank must have a liquidity ratio of at least 40%. With many tier 1 and tier 2 banks battered by the crash in global oil prices and the treasury single account, the estimate of seven banks is ambitious.

All other things equal, banks who would qualify as FXPDs are Zenith Bank, FBN Holdings (First Bank Nigeria Limited), United Bank for Africa, Access Bank, Guaranty Trust Bank, Diamond Bank and Union Bank.

These are the banks that will lockhorns at the market today.

However, other banks that will not participate as FXPDs are already protesting, looking for ways to get into the deal. Some of them have plausible arguments that the exclusive privilege given to these seven banks might lead to abuse, round-tripping and a cartel. While the CBN might not bulge, their arguments should be looked into.

 

Disclaimer

The content on this site, including news, quotes, data and other information, is sourced by PageOne from official and public sources and other third party content providers for your personal information only, and is not intended for trading purposes. Content on this site is not appropriate for the purposes of making a decision to carry out a transaction or trade. Nor does it provide any form of advice (investment, tax, legal) amounting to investment advice, or make any recommendations regarding particular financial instruments, investments or products.