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CBN Directs Banks To Provide For Foreign Currency Loans - Business - Nairaland

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CBN Directs Banks To Provide For Foreign Currency Loans by Adesiji77: 1:58pm On Jul 28, 2016
The Central Bank of Nigeria (CBN) yesterday issued a directive to all deposit money banks to ensure that the unprovisioned foreign currency-denominated loans 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.

In a letter to all banks signed by Tokunbo Martins, director of banking supervision, the CBN said 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.

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.

Part of the letter reads, “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”.

http://businessdayonline.com/cbn-directs-banks-to-provide-for-foreign-currency-loans/

2 Likes

Re: CBN Directs Banks To Provide For Foreign Currency Loans by veekid(m): 3:22pm On Jul 28, 2016
This is good or bad news no; offence
Re: CBN Directs Banks To Provide For Foreign Currency Loans by abnur14(m): 3:22pm On Jul 28, 2016
ok..we hope it yields a positive result..the guy above me tho..I respect d network u using.. lol

2 Likes

Re: CBN Directs Banks To Provide For Foreign Currency Loans by olahero(m): 3:22pm On Jul 28, 2016
Ok
Re: CBN Directs Banks To Provide For Foreign Currency Loans by Heromaniaa: 3:23pm On Jul 28, 2016
This economy never loved us.

1 Like

Re: CBN Directs Banks To Provide For Foreign Currency Loans by fizzile(m): 3:24pm On Jul 28, 2016
Naira is falling like a pack of cards and these people are busy with their trial and error policies.
Nonsence

8 Likes 2 Shares

Re: CBN Directs Banks To Provide For Foreign Currency Loans by bettercreature(m): 3:24pm On Jul 28, 2016
Naira be like i am tired of these Nonsense
I will somersault to 400 Naira within the next 2days

3 Likes

Re: CBN Directs Banks To Provide For Foreign Currency Loans by favouritesahaba: 3:25pm On Jul 28, 2016
wHO DEM GIV?
Re: CBN Directs Banks To Provide For Foreign Currency Loans by idris4r83(m): 3:25pm On Jul 28, 2016
Still waiting for when $1 will be equivalent to N1

5 Likes

Re: CBN Directs Banks To Provide For Foreign Currency Loans by agitator: 3:26pm On Jul 28, 2016
Trial and error continues grin grin grin

If GEJ had been in power, APC would have taken him to the cleaners with all this rubbish we have been experiencing. grin grin grin

8 Likes 2 Shares

Re: CBN Directs Banks To Provide For Foreign Currency Loans by Pavore9: 3:26pm On Jul 28, 2016
The Nigerian situation is now like the Snake and ladder game, nothing is certain.

1 Like

Re: CBN Directs Banks To Provide For Foreign Currency Loans by Nobody: 3:30pm On Jul 28, 2016
veekid:
This is good or bad news no; offence
..... undecided

Re: CBN Directs Banks To Provide For Foreign Currency Loans by savio93(m): 3:30pm On Jul 28, 2016
Pls who understands this?
Re: CBN Directs Banks To Provide For Foreign Currency Loans by AleAirHub(m): 3:34pm On Jul 28, 2016
Naira is falling daily... embarassed embarassed embarassed

And

Confuse policies is been implemented.


CHAIN tongue tongue tongue No CHANGE INDEED.

2 Likes

Re: CBN Directs Banks To Provide For Foreign Currency Loans by manny4life(m): 3:35pm On Jul 28, 2016
Wait, if I understand clearly, the CBN issued a directive to all banks to make available foreign currency loans to who? Why? For what reason? Two questions:

1. Does Nigeria now trade in Naira OR other foreign currency? Who will fund this transaction?

2. How will this policy help the Naira from sliding down further?

The CBN is just as helpless as Buhari, I'm beginning to understand that there's nothing that can be done about Nigeria's economy. Our economy is more like the more you look, the less you see.

2 Likes

Re: CBN Directs Banks To Provide For Foreign Currency Loans by Iamsolslim(m): 3:37pm On Jul 28, 2016
were lawon sibihen yii sha cry
Re: CBN Directs Banks To Provide For Foreign Currency Loans by Harwoyeez(m): 3:38pm On Jul 28, 2016
Confusing n interesting
Re: CBN Directs Banks To Provide For Foreign Currency Loans by jerryunit48: 3:39pm On Jul 28, 2016
Ok but can they pay back in foreign currency while earning in Naira ?
Re: CBN Directs Banks To Provide For Foreign Currency Loans by dadaijboy: 3:46pm On Jul 28, 2016
Ok
Re: CBN Directs Banks To Provide For Foreign Currency Loans by Masta2: 3:46pm On Jul 28, 2016
This is bad news for the Bank's and for their investors. Profits will take a hit as a result of this directive as delinquent foreign loans will have to be classified appropriately. In the long term however, it will make them look towards financing sectors that maybe less profitable like (Oil and gas) but more stable (Housing, Agric and IT)

1 Like

Re: CBN Directs Banks To Provide For Foreign Currency Loans by Nobody: 3:49pm On Jul 28, 2016
What is wrong with CBN, if you implement this, money laundering would be very easy for politicians.

Do we have to create a flawn system to revitalize the economy?

1 Like

Re: CBN Directs Banks To Provide For Foreign Currency Loans by amclimax(m): 4:13pm On Jul 28, 2016
our cbn manager talks more than a new married woman this days....
Re: CBN Directs Banks To Provide For Foreign Currency Loans by yomi007k(m): 4:16pm On Jul 28, 2016
I no even understand wetin dem mean sef.....
Any banker, economist, accountant etc epp me pls.

1 Like

Re: CBN Directs Banks To Provide For Foreign Currency Loans by PastorAji(m): 4:21pm On Jul 28, 2016
^^^^^^^
It means every loan given in Uncle Ben should be reported in Bank P/l account and Balance Sheet
Re: CBN Directs Banks To Provide For Foreign Currency Loans by Agimor(m): 4:30pm On Jul 28, 2016
What type of economy is Nigeria currently operating is it fixed or flexible answer currently needed pls.

1 Like

Re: CBN Directs Banks To Provide For Foreign Currency Loans by dancewith: 4:38pm On Jul 28, 2016
In simple terms, it means all foreign currency loans (Loans Nigerian banks had disbursed in foreign currency, usually called foreign currency lines) must now be classified as performing or non performing. In the non performing category, these are further classified as doubtful or lost. Each classification of the non performing loans requires the banks to set aside a portion of their income or capital to cover for the possibility that the loan may not be repaid (called provisioning). Doubtful or lost requires different amounts to be set aside

The only surprise here is that this wasn't being done already because this has been the norm for naira denominated loans

4 Likes

Re: CBN Directs Banks To Provide For Foreign Currency Loans by OluDare01(m): 4:44pm On Jul 28, 2016
fizzile:
Naira is falling like a pack of cards and these people are busy with their trial and error policies.
Nonsence
You can say that again
Re: CBN Directs Banks To Provide For Foreign Currency Loans by mindworx: 5:02pm On Jul 28, 2016
dancewith:
In simple terms, it means all foreign currency loans (Loans Nigerian banks had disbursed in foreign currency, usually called foreign currency lines) must now be classified as performing or non performing. In the non performing category, these are further classified as doubtful or lost. Each classification of the non performing loans requires the banks to set aside a portion of their income or capital to cover for the possibility that the loan may not be repaid (called provisioning). Doubtful or lost requires different amounts to be set aside

The only surprise here is that this wasn't being done already because this has been the norm for naira denominated loans

Thank you. My first thot too

1 Like

Re: CBN Directs Banks To Provide For Foreign Currency Loans by paranorman(m): 5:21pm On Jul 28, 2016
dancewith:
In simple terms, it means all foreign currency loans (Loans Nigerian banks had disbursed in foreign currency, usually called foreign currency lines) must now be classified as performing or non performing. In the non performing category, these are further classified as doubtful or lost. Each classification of the non performing loans requires the banks to set aside a portion of their income or capital to cover for the possibility that the loan may not be repaid (called provisioning). Doubtful or lost requires different amounts to be set aside

The only surprise here is that this wasn't being done already because this has been the norm for naira denominated loans
thanks, good boy/girl.
Re: CBN Directs Banks To Provide For Foreign Currency Loans by xukwaa: 5:24pm On Jul 28, 2016
The essence of the additional loan provisioning is to nil off the fictitious exchange gain arising from the increase in the Naira value of bad debts denominated in foreign currencies.

For example,

Bank A has $1,000 worth of bad loans. These bad loans were recognised in the books of Bank A as N198,000 (converted at the rate of N198 to $1)

Bank A provided for 100% of the bad loans. This reduced Bank A's profit before tax by N198,000

In July 2016, the exchange rate of the Naira to the Dollar depreciated to N320. As a result of this, Bank A recognised a fictitious exchange gain of N122,000 (N320,000 - N198,000) thereby increasing the profit before tax by N122,000.

However, the CBN directs Bank A to make an additional provision of N122,000. This will reduce the fictitious exchange gain initially recognised to nil (zero).


You can download the CBN circular from here: https://www.cbn.gov.ng/Out/2016/BSD/PROVISIONING%20FOR%20FOREIGN%20CURRENCY%20LOANS.pdf

3 Likes

Re: CBN Directs Banks To Provide For Foreign Currency Loans by kings09(m): 5:36pm On Jul 28, 2016
This CBN is confused oo. U liberalised d forex market yet want to control it @ d same time. Wats CBN's biz wit if banks provide for loans in foreign currency. Emefiele is as confused as Buhari. His exit jst de smell and e be like economists don scarce for 9ja. Pls, it's time to import some good n practical economists cos Emefiele has lost it especially in Basic Economics
Re: CBN Directs Banks To Provide For Foreign Currency Loans by Nobody: 5:37pm On Jul 28, 2016
This will further worsen the naira.


The simple solution is to get more inflows ($). All this trials will only ridicule the naira the more. It is a pity

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