RICHARD MAMMAH, FELIX OLOYEDE & JULIUS JOHN|      The current state of free-fall of the naira is causing ripples among Nigerians, especially those in business circles.

The national currency has lost over 13 per cent of its value since the Central Bank of Nigeria (CBN) announced the stoppage of its erstwhile policy of allocating $10, 000 to Bureau de Change (BDC) operators in the country on a weekly basis.

The naira which opened trading last week, exchanging for N264 against the dollar at the parallel market, ballooned to a record N305/$1 at the close of business on Thursday, although the apex bank is still holding on to its position that the exchange rate is still N197/$1.

This development has triggered worries amongst investors, especially those who engage in imports into the country, as they are expressing concern over the fate of their businesses.

Indeed, many business owners have been groaning since the apex bank introduced various restrictions into the country’s foreign exchange market as part of measures to strengthen the ailing naira, saying that these policies have been stifling their ventures.

The CBN has been struggling to meet the country’s forex demand since global crude oil prices began their decline in July 2014, with a lot of importers not having their Letters of Credit (LCs) funded, making many manufacturers unable to import their raw materials.

The price of crude oil which had climbed to a record $114 in mid-2014 had fallen below $30 at the end of last week.

And bothered by the rate at which the naira has been tumbling in recent times, the Senate, last week, summoned the CBN Governor, Mr Godwin Emefiele, to appear before it this week.

The President, NECA’s Network of Entrepreneurial Women (NNEW), Mrs Lola Okanlawon, who is an importer, in a telephone interview with Business Hallmark, expressed concern that for a long time she has not really done any fresh business on account of her inability to access forex.

“It has seriously affected business; there is nothing we can do about that. We just hope that they would find a quick solution to it, so that it would not cripple businesses to the extent that they would close shop,” she opined.

Mrs Okanlawon noted that the long period it takes businesses in getting approvals from the CBN to fund their LCs is worrisome.

Indeed, some companies affected the CBN dollar restrictions and other extenuating economic conditions have started laying off their workforce.

Just last week, Innoson Motors, a major vehicle assembling company in Nnewi, Anambra State, sacked about 50 per cent of its workers. And one of the reasons the management of the company cited as being responsible for this, was its inability to access forex to import its Completely Knocked Down (CKD) and Semi Knocked Down (SKD) vehicles.

Equally, Bajaj motorcycle assembly suspended its Nigerian operations citing poor economic conditions that have triggered a 50 per cent drop in its production volume in 2015. As a further consequence, it also sacked 250 of its contracts workers.

On account of the developing crisis, there has been intense pressure on the CBN to further the devalue the naira, following the massive decline in the global price of crude oil, which is the country’s major forex earner, accounting for almost 90 per cent of its forex.

But the apex bank has resisted, saying that it would continue to defend the currency, though this has depleted the country’s foreign reserves, which now stands at $28billion.

The Director-General, Lagos Chamber of Commerce and Industry (LCCI), Dr Muda Yusuf told Business Hallmark that the present situation was very disturbing to the business community.

He argued that uncertainty still pervades the country’s economy, which has continued to weaken investors’ confidence.

He would however not completely write of the apex bank’s initiatives in addressing the crisis at hand.

“The decision of the CBN to reverse some aspects of its policies restricting people from making cash deposit of dollars into their accounts is a step in the right direction. And its decision on the Bureau de Change is also not a bad one, provided it expands the scope for them in the autonomous market,” Dr Yusuf enunciated.

The LCCI Director-General however stressed that for the recent review of the cash deposit of dollar policy to be effective, the hurdle of investors having to get authorization from the apex bank before they could transfer funds to their suppliers abroad, must be lifted and removed.

Banking sector Blues

Not left out of the deepening gloom is the banking system.

Ahead of the release of the composite 2015 financial reports of the nation’s banks, a rash of regulatory afflictions may presently be conspiring to ensure that 2016 will be a very difficult year for operators within the banking sector, Business Hallmark checks have revealed.

And as is the normal practice in this era of shrinking revenues, some of the first casualties are a cutback on further expansion, staff rationalization and the review of salaries and allowances being paid to bank workers.

As an indicator of how rough things have been within the sector, the results from the first two weeks of trading at the Nigerian Stock Exchange have been decidedly bearish. Within the period, investors in the index have lost a whooping trillion naira worth of value with the bearish run not showing any signs of letting up anytime soon.

Opening on January 4 with a total trading volume of N9.76trillion, the composite market capitalization had dropped to N8.95trn by January 12, 2016.

Particularly hit have been banking stocks. The Banking Index which opened trading on January 4 with 268.75 percentage points had slumped by January 12 to 245.95 percentage points.

For several years, the very clear flagship trade on the index, its fortunes have not only nosedived considerably lately, but the once-impregnable Banking Index has also had the unprecedented misfortune of not having any of its representatives on the top gainers chart at the exchange for several days.

One of the specific policy measures expected to have an adverse effect on the fortunes of the commercial lenders in 2016 is the continuing upswing in the gap between the naira and foreign currencies which has been largely precipitated by the fall in the price of the nation’s chief export, crude oil with its consequent adverse effect on government revenues.

With shortages being experienced in foreign exchange supply, the Central Bank of Nigeria, CBN has continued to tinker with its foreign exchange management policies with the much required respite not being evident as at press time. Rather, the continuing escalation of the value gap between the official and black market rates had risen to a frightening N197-N304 as at press time.

Equally deleterious to the fortunes of the commercial lenders is the implementation of the stoppage of COT which is expected to kick off this January. Another is the Treasury Single Account, TSA policy that has shut the door on one of the most viable sources of credit finance for the lenders, namely, public sector funds.

Commenting on the reversals being suffered by the nation’s commercial lenders, Mr. Emma Nwosu, former Managing Director, ACB International, says that at the core, they would really task the average banker and financial institution to become more creative: ‘You know COT is a significant line of income for banks.

If it goes, banks would lose that line of income. However, in many other countries, customers are not charged COT and they still do very well. Banks should now look into corporate finance activities where they would earn fee income. They should increase their lending where they would earn interest income.

And they still have commissions here and there for transfers and other operational activities. For banks to retain their profitability profile, they have to also manage their operational cost, because they are frivolous as the government especially at the senior management level.

There are several services they have to outsource, there services they have to combine and there several allowance they have to review if they want to maintain an acceptable profile of income for shareholders.

Yes, COT is gone, but it would impact so much on their income if they become creative and manage their cost profile.’

On the overall profitability prospects for banks on the year, Nwosu is categorical that the prospects do not appear very bright at the moment. This notwithstanding, he says that with the right mindset and management patterns the picture may not altogether be gloomy:

‘Their profitability would be impaired initially, because they are adjusting to the changes that have been made. First of all, public sector funds would not stay long with them anymore, because of the Treasury Single Account.

Any money that is lodged in any bank would have to go the reservoir account within a particular time limit unlike before. Government would get more interested in the collection system of the banks to ensure that money is not sitting in the banks.

So many will happen that would jolt the banks initially, so their profitability suffer in the short run, but they would recover and find ways of making up for the lost income. Generally, at the end of the year, we may see a shrink in both balance sheet and profitability. But with good management they are bound to recover within the year next.’

Nwosu’s view notwithstanding, many bankers are daily resuming work with the fear that their continued retention of their jobs is not very guaranteed at a time like this. And they have precedents in the matter.

Last year for example, there was a wave of job losses in the sector when the first signs of crisis reared their ugly head. Among others, Access Bank closed down 130 branches, while Zenith Bank shed 1200 jobs, with 8 General managers and deputy general managers being affected. On its part, First Bank served notice on its plan to sack 2,740 staffers and shut down 56 branches.

Also as part of its cost-cutting mechanisms, many of the banks have been accused of continuing to favour a situation where low-cost casual workers and outsourced contract workers are used to do jobs that ought to be handled by fully engaged staff, while the few full-time staff that survive the various rationalisation schemes get saddled with high and unreasonable targets that they must deliver on.

Piqued by this trend, the Association of Senior Staff of Banks Insurance and Financial Institutions (ASSBIFI) last year ‘called on the Federal Government to caution banks over the setting of unreasonable targets and perpetuation of casualization and outsourcing of staff so as to avert looming industrial crisis in the banking industry.’

ASSBIFI’s President, Comrade Sunday Salako noted that ‘the preponderance of unreasonable targets, outsourcing and casualisation  in the sector is unprofessional and satanic, adding that  his union would not watch helplessly without doing something concrete to promote healthy banking in Nigeria.’

Responding to the sceptre of possible further job losses in the banking sector, the National Union of Banks, Insurance and Financial Institutions Employees (NUBIFIE), the umbrella for middle level workers in the country’s financial sector, has stated the issue of looming massive job cut, is of great concern to it.

The General Secretary of the union, Comrade Muhammed Sheikh told Business Hallmark that NUBIFIE would resist any arbitrary lay-off of its members without due compensation.

“We cannot allow arbitrary rejection of our members without payment of legitimate entitlements. And even places that are not properly organised, if we get complaints from them, we will take it up,” he assured.