The Central Bank of Nigeria is finally wielding the big stick against banks who have ‘delinquent’ foreign currency loans that are not yet written off from their books as impairments.
CBN has now directed that all banks must provide for these ‘delinquent loans’ in their balance sheet and reported in their income and expenditure statements.
In statement issued and signed on behalf of the CBN by Mrs. Tokunbo Martins, Director of Banking Supervision, CBN said:
“In continuation of the efforts to enhance efficiency, facilitate liquidity and transparency in the foreign exchange market, the CBN issued the Revised Guidelines for the Operations of the Nigerian Inter-bank Foreign Exchange Market on June 15, 2016.”
“One of the effects of the Guidelines, which liberalized the foreign exchange market, is the increase in balances on foreign currency-denominated loans and advances in the books of banks, especially facilities that had been fully provided for under the previous exchange rate regime, but were yet to be written off, per our extant regulation under Section 3.21(a) of the Prudential Guidelines for Deposit Money Banks in Nigeria of July 1, 2010.”
“Consequently, to ensure adequate and proper provisioning, banks are by this circular, required to ensure that the unprovisioned portion on all such facilities are fully provided for immediately in the income statements and evidence of the additional provisions forwarded to the Director of Banking Supervision within one week of the date of this circular.”
“Additionally, all foreign currency-denominated loans should be reviewed and adequate provisioning made on all delinquent ones in line with the Prudential Guidelines for Deposit Money Banks in Nigeria of July 1, 2010.”
The implication of this directive is that banks will be reporting more impairment charges that would further shrink their profits.
Disclaimer
Content on this site, including news, quotes, data and other information, is sourced by PageOne.ng 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.
