₦airaland Forum

I salute her resolve and tenacity.

hmmm

Look at this crook! I feel like giving you a backhand slap. You went to Kenya to manipulate the leaders like you did in Nigeria and it didn't work and you labelled them Corrupt. Tell me, who is more corrupt than you and the Nigerian government officials you've on your payroll? Abeg don't spoil this Sunday for me.

cool

Mariangeles:
Nigeria is an embarrassment to all oil producing nations...

You forgot Venezuela

No time

Good

Proudlyngwa:
No, it should strengthen investors confidence.
A serious investor will know that you have to make room for loss, if you keep on spending your profit, without making provision for your loss, when that loss comes, you might not be able to absorb the shock.

What of those that bought the stock? I'm not even talking about the banks.

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Lunagirl:
Banks are listed in the stock exchange and are funded by their shareholders. As a way to reward the shareholders, they pay out dividends (a part of their profit, after removing expenses).

Before these dividends are paid, a bank also removes some part of its net profit and put it in their reserves. This is to ensure that if there is any loss, the banks can recover from it. Just like your normal savings.

Apparently, some banks are using a large percentage of their profits to pay out dividends or dipping it's hands into its reserves. You won't use your savings to buy human hair to satisfy your friends right?

Now, there is a capital adequacy ratio and this means that all banks must have a certain amount of capital with the CBN to operate in Nigeria. I think it is currently 50 billion naira. This is also another shock absorber reserve.

There is also the composite risk rating which places banks into different categories depending on their strengths and weaknesses.

The NPL is the non performing loan ratio which considers the number of loans that the bank gives that are not being repaid. If you give out 80% of your money on loan and people are not repaying, you shouldn't be giving out loans at all.

CBN is simply saying that you should pay out dividends according to your capital and risk profile.

This is as far as I can understand. I hope it makes sense.

Cool. But won't this action discourage investors from buying shares? I mean, some of shares bought may have been sourced from loans.

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