CBN Orders Banks to Write Off Forex Bad Debts

Central Bank of Nigeria (CBN) has ordered banks to write off all the delinquent loans in line with its Prudential Guidelines for Deposit Money Banks in Ni­geria of July 1, 2010.

This followed the discovery of steep rise in hard currency debts in the nation’s banks following its revised guidelines on the operations of the Nigerian Inter-bank foreign exchange market.

Mrs Tokunbo Martins, director of Banking Supervision of the CBN in a statement sent to all the banks yesterday, frowned at the increase in the balances on foreign currency-denominated loans and advances in the books of banks, particularly those that are yet to be writ­ten off.

“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”, says the statement

The circular with reference number GEN/LAB/09/037 dated July 27, 2016 and titled Provisioning for Foreign Cur­rency Loans reads:

“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 liberalised 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 as 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.”