₦airaland Forum

The Central Bank of Nigeria has reiterated that banks operating in the country cannot use their foreign exchange revaluation gains to pay dividends or meet their operational expenses.

In a circular from the apex bank on Thursday signed by the acting Director, the Banking Supervision Department, Adetona Adedeji, banks were warned against such a move.

“Further to our letter dated September 1, 2023, referenced BSD/DIR/CON/LAB/16/020 on the above subject, the Central Bank of Nigeria wishes to reiterate that banks are required to exercise utmost prudence and set aside FCY revaluation gains as a counter-cyclical buffer to cushion any adverse movements in the FX rate.

“In this regard, banks shall not utilise such FX revaluation gains to pay dividends or meet operating expenses.”

The CBN had in September directed Deposit Money Banks to stop utilising gains from their foreign exchange revaluation for dividends and operational expenditures.

In a letter dated September 11, 2023, and signed by then CBN Director, Banking Division Department, Haruna Mustafa, the apex bank said the new directive was expected to be implemented immediately.

Forex revaluation gains occur when there is an increase in the value of a bank’s assets and liabilities denominated in foreign currency due to a change in the exchange rate between the foreign currency and the local currency.


Several Nigerian banks reported high revaluation gains in their third-quarter reports, setting them up to report better figures for the full year.

Some of the lenders that have released their full-year results have posted impressive performance.

In the September circular, the CBN assessed the consequences of the recent FX rate regime change on the banking system and identified its potential to substantially impact the naira values of banks’ foreign currency assets and liabilities.

“The bank thus approved the following prudential guidance and directives for immediate implementation by banks. Treatment of FX Revaluation Gains: Banks are required to exercise utmost prudence and set aside the FCY revaluation gains as a counter-cyclical buffer to cushion any future adverse movements in the FX rate. In this regard, banks shall not utilise such FX revaluation gains to pay dividends or meet operating expenses.

“Single Obligor Limit (SOL): Banks that inadvertently breach the Single Obligor Limit (SOL) due to the FX policy will be granted forbearance upon application to the CBN. The forbearance shall apply only to existing facilities as of the effective date of this policy. Such banks shall be exempted from the regulatory deductions on the excess above the SOL limit in their CAR computation.

“Net Open Position Limit: Banks that exceed the NOP prudential limits due to the FX revaluation shall be granted forbearance for the breach upon application,” the circular partly read.

Paraman:
https://punchng.com/cbn-insists-banks-cant-pay-dividends-from-fx-revaluation-gains/

Validated:
Is CBN confused?

CBN should also tell us if such revaluation can be reported as profits (extraordinary gains).

Would CBN be prevailing on FIRS to exempt those profits from Companies Income Tax?

Would CBN have asked the banks to create a revaluation loss account if the reverse was the case or would they have been asked to write-off such losses?

Validated:
Is CBN confused?

CBN should also tell us if such revaluation can be reported as profits (extraordinary gains).

Would CBN be prevailing on FIRS to exempt those profits from Companies Income Tax?

Would CBN have asked the banks to create a revaluation loss account if the reverse was the case or would they have been asked to write-off such losses?

Validated:
Is CBN confused?

CBN should also tell us if such revaluation can be reported as profits (extraordinary gains).

Would CBN be prevailing on FIRS to exempt those profits from Companies Income Tax?

Would CBN have asked the banks to create a revaluation loss account if the reverse was the case or would they have been asked to write-off such losses?

Misterc:
Omoooooooo...... Nigeria currently is a dog eat dog animal world currently.....
The strong is oppressing the weak and the weak is oppressing the weaker....
Meanwhile the poor are begging just to breath..
And the sun is choking down on all with massive heat..

Validated:
Is CBN confused?

CBN should also tell us if such revaluation can be reported as profits (extraordinary gains).

Would CBN be prevailing on FIRS to exempt those profits from Companies Income Tax?

Would CBN have asked the banks to create a revaluation loss account if the reverse was the case or would they have been asked to write-off such losses?

benuejosh:
Very good.

I think our monetary body is getting it right gradually. Allow the FX market to be stable. What gains have you made in Naira, let the Naira pick up by creating the demand for it.

Banks post huge financial gains yet low economic activity to help boost our local economy. The gains comes majorly from FX gains. Since you made the gains from FX, allow to it be there and don't touch it let us see what the Naira side is for you. Let the FX market stay untouched and if you can't use the naira to pay then push for activities that will yield more naira for you. Give loans to customer in Naira to carry out businesses and bring profit for you and themselves. Let that demand for Naira be there.

Kingcalls:
Na im b say no dividends to be received.. these banks have been using the valuation of dollars to post profits

benuejosh:
Very good.

I think our monetary body is getting it right gradually. Allow the FX market to be stable. What gains have you made in Naira, let the Naira pick up by creating the demand for it.

Banks post huge financial gains yet low economic activity to help boost our local economy. The gains comes majorly from FX gains. Since you made the gains from FX, allow to it be there and don't touch it let us see what the Naira side is for you. Let the FX market stay untouched and if you can't use the naira to pay then push for activities that will yield more naira for you. Give loans to customer in Naira to carry out businesses and bring profit for you and themselves. Let that demand for Naira be there.

mikeapollo:
The revaluation loss will be reported as a separate line item, with specific notes to the accounts explaining it is not available for distribution.
With this directive, the FIRS should exempt those profits from CIT
It is more prudent to recognize potential losses immediately, while deferring the recognition of potential gains, hence the CBN would have asked the banks to write-off revaluation losses.

My humble opinion

BarrElChapo:
You sound smart writing rubbish 😂

BeardedTraveler:
Most people just come here to bash CBN without even understanding the policies

ppogba:
Your humble opinion is succinct and professional.

Well said.

I think people are not aware that CBN has said this earlier on. They are just re-emphasizing now that the YE results are being awaited.

sterlingD:
I am suspecting that CBN is about to release the Audited Financial Statements 2023 results all the bank results and so they are re-emphasizing it.

Validated:
Is CBN confused?

CBN should also tell us if such revaluation can be reported as profits (extraordinary gains).

Would CBN be prevailing on FIRS to exempt those profits from Companies Income Tax?

Would CBN have asked the banks to create a revaluation loss account if the reverse was the case or would they have been asked to write-off such losses?