Nigeria Bankers Committee bars commission on retail forex transactions

In a move to promote uniformity and streamline operations within the banking industry, members of Nigeria's Bankers' Committee have recently announced the removal of commissions charged on retail foreign exchange transactions. The decision comes as a response to the Central Bank of Nigeria's efforts to stabilize the exchange rate system and ensure liquidity in the Forex market. Uche Ugboh, Team Lead of Assets and Liabilities Management at Diamond Bank, discussed the implications of this decision and provided insights into the fixed income and Forex space during an interview with CNBC Africa. Ugboh emphasized that the elimination of commissions on retail Forex transactions aims to create a level playing field across banks, as some institutions previously charged fees while others did not. By standardizing the practice, the Central Bank is working towards achieving stability in the exchange rate system and fostering a more cohesive banking environment. While Ugboh acknowledged that this change may not have a significant impact on banks that were not charging commissions, he highlighted the importance of aligning industry practices. When asked about the current state of the Nigerian currency, Ugboh expressed confidence in the Central Bank's ability to defend the Naira, attributing this to the country's substantial foreign reserves and robust market interventions. With Nigeria's foreign exchange reserves standing at around $42 billion and significant inflows into the NAFX market, Ugboh predicted a period of stability in the near term. He noted that the sustainability of this stability would depend on global oil prices and production levels in the country. Addressing concerns about potential currency weakness leading up to the upcoming elections, Ugboh acknowledged that political spending often drives up demand for foreign currency. However, he suggested that the impact of increased demand on the Naira may be mitigated by strong inflows into the market and rising reserves. While Ugboh anticipated a surge in demand closer to the elections, he expressed optimism that the currency would not face substantial devaluation. Shifting focus to the fixed income market, Ugboh discussed the government's plan to issue more dollar-denominated debt in place of local currency debt. He noted that this strategic shift could reduce domestic issuances and potentially lower yields in the market. Ugboh highlighted the impact of international market dynamics on local bond yields and emphasized the need to monitor global trends for potential changes in demand. In terms of short-term projections for the fixed income space, Ugboh expected continued volatility, with yields fluctuating between 30 and 55 basis points. Despite some corrections expected in the immediate future, Ugboh projected ongoing volatility in the market for the remainder of the week. He attributed this volatility to low liquidity levels and anticipated some stabilization in the market in the near term. Overall, the decision to eliminate commissions on retail Forex transactions reflects a broader effort to enhance operational efficiency and promote stability in Nigeria's banking sector. As the industry adapts to these changes, stakeholders will closely monitor market developments and government initiatives to navigate the evolving financial landscape.