Foreign investors in the Guaranty Trust Bank’s Global Depository Receipts (GDRs) are eagerly awaiting the lender’s new dividend payment plan after a delayed payment. The Tier-1 bank said it delayed dividends payout to investors in its GDR due to difficulties in sourcing dollars, due to worsening greenback scarcity.
In a note to GDR holders, the bank explained that its registrar – the company which maintains lists of bond and shareholders – was in a queue with the Central Bank of Nigeria (CBN) for dollars to make the payout.
GT Bank, Nigeria’s top lender, declined to comment on the size of the dividend to be paid to holders of its GDRs, which are traded in London. It issued the GDRs in 2007 to raise $750 million. It paid out a total dividend of N2.80 per share in 2019.
Rise in dollar demand backlog estimated at over $2 billion has pushed the apex bank into rationing dollars to companies and banks demanding for the greenback. Many of the investors cash are trapped in Nigeria’s debt market as dollar liquidity dries up due to a lack of fresh inflows and persistent drop in crude oil prices. Crude oil revenue constitute over 90 per cent of foreign-exchange earnings for Nigeria.
Value of dollar transactions in the Investors’ and Exporters’ (I&E) Forex Window where foreigners buy dollars has dipped from $300 million per day two months ago to $20 million. The naira has also depreciated past N498.5 to dollar on the one-year non-deliverable forwards markets following the continued drop in crude oil prices and consistent dollar scarcity.
A forward market is an over-the-counter marketplace that sets the price of a financial instrument or asset for future delivery. Forward markets are used for trading a range of instruments, especially at the foreign exchange market. The Naira at the weekend, fell to N477 to dollar on the parallel market after the Federal Government said it would reopen airports for international travel in two weeks’ time, a move that could increase dollar demand, traders said.
The naira had been stable for over a week on the black market at 475 per dollar, where it trades at more than 20 per cent weaker to the official over-the-counter spot market. The CBN recently devalued the naira at the official market to N379 to dollar. With the price of oil, Nigeria’s main export, depressed and foreign exchange reserves dwindling, its Central Bank of Nigeria is hanging on to dollars to support the naira – leaving a shortage of hard currency supply for investors and importers.
Currency markets anticipate an increase in demand with airports having been closed since March 23 to all but essential international flights as part of efforts to combat the COVID-19 pandemic. In March, the CBN suspended forex sales to Bureau De Change (BDC) operators that resell hard currency to individual users with medical bills and school fees abroad. As international travel resumes from August 29, traders anticipate a surge in dollar demand, likely heightening pressure on a currency that has been devalued twice so far, and stretching the central bank’s ability to defend the naira.
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