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Q4 currency revaluation gains may shrink as naira holds steady

With naira maintaining relative stability in recent weeks due to improved supply and support by the Central Bank of Nigeria (CBN) especially at the interbank foreign exchange (FX) market, finance experts have predicted that Quarter 4 currency revaluation gains may be on the decline for Nigerian Banks.

Experts from Financial Derivatives Company (FDC) revealed that CBN in a bid to support the local currency had sold $500million of 60 and 90 day forwards, one week after selling $313 million of 75-day forwards with all settlements to be in early 2017, will still sell $500 million of two-and three-month currency forwards and that “ the immediate impact will be low liquidity in the money market according.”

In the just concluded week, Nigerian Naira appreciated against the greenback at the interbank foreign exchange market by 0.04 per cent to N318/USD.

Available records show that Nigeria’s banks fared better in the past quater, helped by gains from foreign exchange. While mid-tier lenders Skye Bank Plc and Diamond Bank Plc made losses during the quarter, all of the others were profitable. Guaranty Trust Bank Plc, the biggest lender by market value, made net income of N42 billion, up 94 per cent from a year earlier. Zenith Bank Plc, the second biggest lender, generated profit of N55 billion.

Some of them benefited from the devaluation because they had more dollar-denominated assets than liabilities, allowing them to book gains, according to Ronak Gadhia, an equity analyst at London-based Exotix Partners LLP. They may find the last part of the year tougher, especially if Nigeria continues to hold the naira, he said.