The Consumer Protection Council has directed the management of First City Monument Bank to refund a total of N1.54bn to the Bauchi State Government, being the amount said to be illegally deducted by the bank from the state’s loan account.
According to the council in a statement issued on Sunday, the order was made after the conclusion of an investigation into a petition by the state government.
The state had claimed that it was short-changed by the FCMB to the tune of N1.86bn as excess interest and other charges on its loan account with the bank.
The CPC also stated that the state government decided to send the petition to the council after the Central Bank of Nigeria had declined further adjudication on the case through a letter dated July 15, 2015.
The CBN had in the letter to the petitioner requested it to “seek alternative means of redress as the case is hereby deemed closed.”
But the CPC said in the statement that the FCMB, which was known as First Inland Bank Limited when the loan was granted, gave the state two-term loans of N10bn and N3bn in 2009 and 2011, respectively.
The loans, according to the state government, were given at 13 per cent floating interest rate, while the FCMB said the interest was increased to 21 per cent.
Following the complaint to the CPC by the state government, the statement said the Director-General of the council, Mrs. Dupe Atoki, constituted a panel of experts that deliberated extensively on the matter and provided the parties the opportunities to make representations.
The statement read in part, “Having reviewed the various responses, documents and presentations made by the parties at the investigative hearings, the council disclosed that it found out that the increase in the interest rate was not duly communicated to the Bauchi State Government and that the interest rates applied across board by the FCMB were excessive and arbitrary with some charges as high as over 50 per cent
“The council also found that apart from the arbitrary and excessive interest charges, the substantial part of the unlawful deductions was made from the principal loan repayment.
“Also identified as part of the illegal deductions by the CPC’s investigation was the excess processing fees and even management fee, which was not provided for in the offer letters.
“The council, therefore, ordered the FCMB to refund to the Bauchi State Government all excess interest charges and unlawful deductions in the total of N1,542,775,841.58 and at the prevailing interest rate.”
The CPC ordered the bank to report compliance within 30 days of receiving its directive.
It also ordered the bank to develop and present to it a Customer Complaint Resolution Policy within 30 days of the receipt of the order and to post it on its website.
The naira is expected to continue to weaken this week on limited dollar supply as foreign portfolio investors stay on the sidelines until the Nigeria economy shows signs of recovering from the impact of currency controls, foreign exchange traders have said.
The naira had hit an all-time low of 334.50 per dollar on Wednesday, a day after the Central Bank of Nigeria hiked interest rates to try to lure foreign investors back into local assets, Reuters reported.
Forex traders said investors were pushing the naira lower to test the limit of how far it could fall, given a spread of almost 12 per cent between the official and black market dollar-naira exchange rates.
On Friday, the naira closed at 321.16 to the dollar at the interbank market, compared to 292.40 the previous Friday.
At the parallel market, the local currency closed at 380 against the greenback on Friday, compared to 378 a week earlier.
According to financial analysts and experts, the naira may weaken further, especially at the interbank market, if the CBN fails to intervene at the market this week.
“We are in a very challenging situation as a country and the CBN needs to do something urgently to stabilise the exchange rate at the interbank market,” analyst and Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, said.
He added, “If the CBN fails to intervene, the naira may fall further against the dollar at the interbank market. If it does, the naira may appreciate to say about 310/dollar. But the point is that the market needs sustained intervention until there is a calm that will assure the foreign investors that things are now normal.”
Chukwu believes the CBN may need to access close to $10bn facility from the World Bank to stabilise the forex market.
Meanwhile, Ghana’s cedi is expected to be firm, underpinned by inflows from offshore investors who bought government debt two weeks ago, Reuters reported.
The cedi is expected to trade steady against the dollar this week on residual forex inflows from investors who took part in a five-year domestic bond sale a fortnight ago.
The local unit has been fairly stable last week after settlement of the bond on Monday. It closed at 3.9620 to the dollar on Friday, stronger than 3.9650 a week earlier.
“The pair (cedi/dollar) is expected to remain fairly stable around 3.9650 levels on the market, even in the face of a steadily growing demand from importers,” an analyst at Dortis Research, Joseph Amponsah, said.
The Kenyan shilling is expected to post gains, boosted by expected inflows from foreign investors taking up government debt, wooed by a surge in rates.
Commercial banks quoted the shilling at 101.35/45 to the dollar, stronger than the previous week’s close of 101.45/65.
The Tanzanian shilling is seen buoyed by sagging dollar demand and increased inflows from large companies in tourism and agriculture sectors.
Facts have emerged that the federal government under President Muhammadu Buhari got a total N2,203,573,573,563.25 from the Federation Account as allocation between June 2015 and May 2016.
In a recent search by the Economic Confidential, the economic intelligent magazine and carefully computed, the administration under Buhari’s watch got the highest allocation in July 2015 with N412.60 billion and the lowest allocation within the period under review of N113.80 billion in May 2016.
The report further reveals that in June 2015, the federal government received N173.91 billion made up of N159.72 billion for consolidated Revenue fund, N3.27billion for share of derivation and ecology, N1.63 billion for stabilisation fund, N5.49 billion for development of natural resources, and N3.78 billion for the Federal Capital Territory Administration (FCTA).
In August, September and October 2015, it received N216.99 billion, N180.86 billion and N162.93 billion respectively.
Between November and December 2015, the federal government also got N205.15 billion and N151.64 billion to end the year.
At the start of 2016 and precisely January, it received N175.04 billion made up of N160.87 billion for consolidated revenue fund, N3.10 billion for share of derivation and ecology, N1.77 billion representing that of stabilisation fund, while development of natural resources and FCT stood at N5.46 billion and N3.82 billion respectively.
As for the month of February, March and April this year, it was the peak of “low returns on investment” as the federal government witnessed in a descending order of N150.32 billion, N139.36 billion, N120.92 billion to close the first quarter in a not too- cheering manner.
Recall that the economic intelligent magazine had recently investigated and published the allocations from the federation account to states and local governments in the country in the last one year, apart from Internally Generated Revenue(IGR) accruing to the 36 states of the federation and Abuja.
It has also published what major revenue collecting agencies have also received within the period.
The report on IGR indicated that only Lagos State generated more revenue than the allocation from the Federation Account which was about 150 per cent.
It also revealed that the IGR of N268 billion by Lagos State in 2015 is more than that of 32 other states put together that generated a total of N257 billion.
Meanwhile, it gathered that apart from the allocations from the Federation Account, as at the end of March this year, total inflows into the Treasury Single Account (TSA) of the federal government under President Buhari stood at N3 trillion while the number of ministries, departments and agencies (MDAs) rose to 976.
However, Minister of Finance, Kemi Adeosun, recently disclosed that the TSA has significantly witnessed an increase to N3.3 trillion in May 2016, noting that the Finance Ministry had continuously discovered revenue platforms that had escaped its net especially, shipping levies, airport landing charges, visa fees amongst others.
A natural consolidation in form of mergers and acquisitions is likely in the Nigerian banking sector, economic and financial experts have predicted.
They said with the myriads of challenges facing the nation’s economy, some banks were likely to experience some challenges that could only be resolved by mergers and acquisitions.
The Chief Executive Officer, Financial Derivatives Limited, Mr. Bismarck Rewane, said the economic storm gathering over the country might lead to a shake-out in the banking sector.
This, he said, was better than having a situation where a bank would collapse.
Speaking about the ongoing economic crisis and the spate of non-performing loans, Rewane said, “It will affect their profitability initially and eventually it is going to affect their liquidity and solvency.
“Because of the squeeze in profitability, there will be a natural consolidation and a shake-out.”
He, however, expressed the hope that the Federal Government’s stimulus package and other measures aimed at enhancing growth would work and help tackle the economic storm.
An economist, Prof. Pat Utomi, said good mergers and acquisitions strategy could help prevent crisis in the banking sector and avoid a regulatory risk.
Utomi, who did not state whether a consolidation was imminent in Nigeria, however, stated that it would not be construed as negative thing if it happened.
He said, “There is nothing good or bad about mergers and acquisitions on its own. The question is whether it will amount to creating value or not. It happened in the United States in the 1980s.
“A good mergers and acquisitions strategy can prevent regulatory risk. A situation where the central bank will take action on a bank and there will be panic and everybody begins to run helter-skelter to withdraw their money is not good for a bank. If the fundamentals of a bank are beginning to get challenged, it is better a discussion is held with another bank and it is acquired. What creates a problem is regulatory risk.”
According to Utomi, the economy needs to begin to produce and relevant policies that will enhance this must be put in place.
He added that banks could be a good agent in helping to stimulate domestic production.
The Executive Director, Sterling Bank Plc, Mr. Abubakar Suleiman, had said in February that a drop in naira by just 20 per cent would trigger a wave of bank mergers.
Since a devaluation last month, the currency has lost double that against the dollar, according to a report by Reuters.
Overall, 42 per cent of loans extended by Nigerian banks are in dollars. If the naira falls far enough, it will force some banks to recapitalise in order to have enough naira to stay within financial stability limits.
“There is concern around the evolution of banks’ capital adequacy if the naira continues to weaken,” the Chief Economist, Standard Chartered Africa, Razia Khan, said
She added, “As the naira weakens, FX loans are likely to be problematic.”
Non-performing loans are expected to jump to 12.5 per cent of the total loans of the banks this year, up from the central bank’s target level of five per cent at the end of last year, as lenders suffer a hangover from an oil sector credit boom that ended abruptly in 2015, according to Agusto & Co, Nigeria’s main rating agency.
The country’s 21 banks have been laying off staff, closing branches and slashing earnings forecasts, but some are unlikely to survive the storm, analysts say.
According to London-based analysts Exotix, UBA, Diamond and Guaranty Trust Bank have the highest ratio of dollar loans at 50 per cent apiece.
Diamond Bank declined to comment, while UBA and GTB said they saw no need for recapitalisation due to the devaluation of the currency.
One Lagos-based banking analyst, who asked not to be named, said three or four medium-sized banks might need to raise capital.
The central bank has said it is monitoring one or two lenders for liquidity, without naming them.
Adding to the uncertainty, GTB delayed its half-year earnings this week pending an interim audit.
Two mid-tier banks, Skye and Stanbic IBTC, the local arm of South Africa’s Standard Bank, said they had not yet released first quarter earnings.
Some banks have themselves borrowed heavily in dollars, debt that now costs much more to service.
Top of this list is GTB, which has $1.6bn in dollar-denominated debt, followed by First Bank of Nigeria, with $915m, according to Thomson Reuters data. First Bank was not immediately available to comment.
Anticipating problems from a weaker naira, investors have been selling off banking stocks for the last year, sending the banking index in January to its lowest since it was formed in 2009, and less than half its level in mid-2014.
Many banking stocks, hot foreign investor picks a decade ago during an ‘Africa rising’ boom, remain depressed after a 2009 sector meltdown stemming from the global financial crisis.
Zenith Bank’s shares are a third of their pre-financial crisis highs, Access Bank, a quarter; and First Bank, just 10 per cent. GTB, by contrast, has recovered as it has one of the lowest levels of non-performing loans and its shares are now in line with their 2008 levels.
With the International Monetary Fund forecasting a 1.8 per cent contraction in the Nigerian economy this year, the immediate prospects for the banking sector are grim, but the CBN Governor, Mr. Godwin Emefiele, was adamant that the financial system remained solid.
The Federal Inland Revenue Service (FIRS) continued its tax compliance exercise in Abuja and Lagos, shutting the premises of defaulting companies.
In Abuja, the FIRS team, led by Chinazor Edeh, shut down the office of Taleveras, an energy firm operating from the Maitaima area of the city.
A warrant of distraint presented by the team indicated that the company is owing over N667 million in tax liabilities.
Before sealing off the company, Edeh told its the Chief Security Officer (CSO), the highest ranking official available, the firm has failed pay the balance of its tax liabilities after it paid N50 million, following the sealing off of its premises in May.
Edeh explained that the FIRS was not interested in sealing off the company, but to ensure that the tax is paid.
But the CSO said the company is incapable of defraying the liabilities, as it has not been able to pay salaries. Consequently, the enforcement team ordered the staff to vacate the premises and proceeded to seal off the company.
Also sealed by the enforcement team is Jardin Nigeria Limited, a landscaping/ project management company, with an office at Abuja’s Transcorp Hilton Hotel.
The company owes over N129million in taxes. An official of the company, who identified himself simply as Mr. Olu, admitted that the company owes, but argued that some state governments owe the company over N2 billion.
Edeh advised the company to pay 50 per cent of its tax liabilities and reach agreement with FIRS on a structured payment of the balance.
In Lagos, two companies were shut in the Ikeja area by the FIRS team, led by Anita Erinne.
First to be shut was Guarantee Petroleum Company, located at 21 Salvation Road, off Opebi Road.
Diamond Bank Plc on Thursday released its half year 2016 unaudited financial results. It revealed that its profit after tax dropped to N9.1billion at the end of June 2016, from N12.155 billion in the corresponding period of 2015. The results also showed that its profit before tax during the period under review also plunged to N10.5billion, as against the N14.193billion recorded in the comparable period of 2015.
However, the interim report and accounts of the bank for the first six months of the year also showed that its total comprehensive income rose by 13.3 per cent year-on-year to N16.3billion as against N14.4billion recorded in comparable period of 2015. Non-interest income also surged by 33.4 per cent to N26.5billion, reflecting the successful efforts targeted at improving this income line and also the focused strategy of management, which were sharpened at improving digital functionality and widening financial inclusion.
The bank improved on its credit creation by 28.6 per cent as loans and advances to customers grew from N763.6billion in the comparable period of last year to N982.3billion. Also, loans to other banks jumped by 30.7 per cent to N78.5billion in first half of 2016, from N60.1billion in the corresponding period last year, while its retail customers grew to over 13 million with seven million of these opening accounts in the last two years. Commenting on the results, its Chief Executive Officer, Mr. Uzoma Dozie, stated that despite the headwinds in the economy, the bank remained resilient and assured that it would sustain the positive growth throughout the second half of the year.
According to him, the bank’s strong liquidity and capital adequacy ratios plus its digital transformation have rightly positioned it to meet customer obligations and offer service deliveries that are beyond banking.
He said: “With the domestic economy contracting, the Nigerian banking industry has faced a number of challenges over the last six months. Nevertheless, in the first half of 2016, we have remained resilient in weathering these headwinds and there are real bright spots in our income streams, as well as noteworthy cost reduction, which gives us confidence going into the second half of the year.
“Due to actions taken and an ongoing prudent approach, our regulatory capital remains strong. This position of strength helped offset the one-off impact of the recent devaluation of the naira, as acknowledged by Fitch Ratings when they affirmed our B rating with a stable outlook. Liquidity of the bank also remains high and is well above the guidance ratio stipulated by CBN.”
Speaking further, Dozie stated that despite the catalogue of challenges facing the sub-sector, which were exacerbated by the recent devaluation of the naira and foreign exchange scarcity, culminating in backlog of unpaid salaries and wages for individuals, Diamond Bank has continued a diligent implementation of its focus on curtailing cost.
“In the last few months, evidence has shown that the new strategy and initiatives to curtail costs are proving successful and are reflected in the bank’s financial indicators. This is reassuring. Year on year, costs came in lower and as we conclude the organisational restructure, we expect to harvest more savings from operational and employee expenses.
“The primary benefits of this however are the resources that we have freed up to provide improved services to customers. Having done this, we are optimistic that the bank is in the right markets and has the wherewithal to excel and create value for shareholders in the long run,” stated Dozie.
MTN Nigeria on Thursday said that as part of a settlement arrangement with the Federal Government following its fine, it had taken steps to ensure the listing of its shares on the Nigerian Stock Exchange next year, subject to suitable market conditions.
A statement by the telecommunications company’ Public Relations and Protocol Manager, Mr. Funso Aina, read in part, “The Board of Directors has resolved to proceed with preparations for a listing of MTN Nigeria on the NSE as soon as commercially and legally possible, and has established a management task team with the responsibility to guide the company towards a listing.
“At present, MTN Nigeria is targeting that the listing takes place during 2017, subject to suitable market conditions.”
He said that the telecoms firm had appointed Stanbic IBTC Capital Limited (together with its affiliates, The Standard Bank of South Africa Limited and Standard Advisory London Limited) and Citigroup Global Markets Limited as joint transaction advisors and joint global coordinators, with Stanbic acting as the lead issuing house.
Aina added, “A full syndicate, including Nigerian receiving agents, Nigerian receiving banks and other advisers will be appointed in due course as appropriate.
“The proposed listing will be subject to suitable market circumstances and conditions, and the appropriate approvals from relevant regulators and other stakeholders.”
Bank customers with existing loan obligations must brace for higher levels of indebtedness as the Deposit Money Banks have begun an upward review of the interest rates on all outstanding loans.
The development followed Tuesday’s increase of the Monetary Policy Rate from 12 per cent to 14 per cent by the Central Bank of Nigeria’s Monetary Policy Committee.
Multiple banking sources told one of our correspondents on Thursday that the lenders would as early as next week begin to dispatch letters to their customers, informing them of the upward review of the interest rates on their loans.
“Banks don’t waste time on matters like this. The increase in the MPR means interest rates on loans have to go up. We have started writing letters to our customers. A few may go this week, while more will go next week. Customers will get the letters in emails and hard copy,” a top executive of a tier-1 bank told one of our correspondents under condition of anonymity on Thursday.
Other top bank officials, who confirmed the development, did not state the rate of increase in the interest rates on the outstanding loans.
They said the upward reviews of the rates were being done with keen consideration for certain conditions relating to each bank customer.
“What applies to customer A may not apply to customer B. We take keen look at each customer and their peculiar situation, including their loan history with us, before making the review. But the fact is that an increase is inevitable with the hike in the CBN’s MPR,” another top bank official said.
Banking experts say the MPR, often called the benchmark interest rate, is the yardstick for other interest rates bank charges on loans advanced to their customers.
The MPC had after its bi-monthly meeting on Tuesday increased the MPR from 12 per cent to 14 per cent. The measure was meant to reduce the amount of cash in circulation and thus fight inflation, which hit 16.5 per cent in June.
A financial analyst at BGL Plc, a research and investment advisory firm, Mr. Femi Ademola, said banks usually reviewed interest rates on loans whenever the CBN raised or lowered the MPR.
This, he said, was why banks usually included the clause: ‘Subject to prevailing interest rate’ on their offer letters for loans.
Officials said the latest review by the banks might move the interest rate on some loans from between 25 per cent and 27 per cent to around 30 per cent.
Ademola said while the banks would enjoy more interest income from the upward review, a small part of this amount would be paid to savings account customers as interest on their deposits.
In line with the CBN regulations, savings account customers are paid 30 per cent of the MPR as interest on their deposits. With the increase in the MPR, about 0.6 per cent of each customer’s savings account deposit will be credited to their account as accrued interest on their savings.
Analysts described this as negligible compared to what the banks would earn from the additional interest rate imposed on loans.
Meanwhile, manufacturers said the decision of the CBN to raise the MPR was a deadly blow to an already comatose manufacturing sector, adding that more sector operators were bound to close shops.
A local manufacturer of envelopes and Managing Director, FAE Limited, Princess Layo Okeowo, said, “I just pray that we do not all close our doors. The foreign exchange situation is already becoming unbearable with manufacturers having to wait for ages after bidding to get dollars. The increase in interest rate is a bitter pill to swallow and it has made an already bad situation worse.
“It is certain that the banks will readjust their interest rates even for people who have outstanding loans. It is certain that within the next one week, the banks will start writing letters to their debtors notifying them of increased interest rates on loans.
“Manufacturers will have to increase prices and already, the purchasing power is very low and the number of our customers has reduced drastically.”
An executive director in one of the leading aerosol firms in the country, Mr. Kingsley Oni, said because of the scarcity of dollars, his company had to lay off workers for the first time in its more than 20 years’ of existence.
Oni said, “We have over 2,000 workers; because we are not getting dollars, for the first time, we are retrenching. The point is, when they keep raising these interest rates, the impact on the manufacturing sector is very negative.
“The CBN cannot control inflation, but a situation where a country is in this situation and you still find a lot of private jets all over Abuja is what baffles me. One of those jets can be sold and the money ploughed back into the real sector to create jobs if the government is really serious.”
The Chairman, Qualitek Industries, Chief Olayinka Kufile, said although the CBN was trying to control inflation, the reality was that many industries in the country had become comatose.
He said, “Most activities in the manufacturing ector have been grounded. In the basic metal industry where I operate, everything is flat, because while we were trying to get out of the problem of the dollar increasing from N158 to a dollar to N200 to a dollar, we lost a lot of money. Before we could even get out of that, the dollar kept increasing and now it is more than N300 and the people who took loans at the exchange rate of N197 to a dollar are in heavy debts.
“If the government is hoping to earn money in taxes from the non-oil sector, they cannot get those taxes where companies are not producing and making money. Most industries today are not producing and they have reduced their staff strength to near zero.”
For the Director-General, Manufacturers Association of Nigeria, Mr. Remi Ogunmefun, within the concept of economics, the CBN was right to increase the benchmark rate in order to spur savings and investment as well as control inflation.
He said, “The implication of the increase for manufacturers is that the cost of borrowing will rise higher than it is already. It is quite unfortunate because over the years, we have been clamouring for a single digit interest rate.”
The quest to tame inflation and bridge the negative real rates, attract investments and raise savings may be a mirage, if oil crisis persists and monetary-fiscal measures cannot converge in the shortest period.
This captures the positions of financial analysts and real sector operators, who projected a varying outcomes in months to come, as the nation’s benchmark interest rate, currently put at 14 per cent, begins to generate mixed feelings.
According to the real sector operators, manufacturers are in a fix, as access to foreign exchange remains limited while their woes have been compounded with the hike in interest rate.The Monetary Policy Committee of the Central Bank of Nigeria (CBN), on Tuesday, favoured the increase of the Monetary Policy Rate by 200 basis points, saying it is to curtail negative rates against inflation level and attract foreign investment.
The decision, which came as a surprise to majority of financial analysts who had projected unchanged rates, however, said the development, which has effectively reduced negative real interest rate from -4.5 per cent to -2.5 will attract foreign portfolio inflows. But an economist, Dr. Ogho Okiti, said although the decision would add to the currency stability, it is very unlikely to curtail the inflationary pressures largely attributed to cost-shocks.“We are of the view that tightening the interest rate, which will reduce negative real interest rate will come as good news particularly for foreign portfolio inflows. But given the nature of Nigeria’s financial system, interest rates generally paid on savings by commercial banks in Nigeria are usually not dependent on the benchmark rate.
“We think that savings account holders, who have seen the real returns on their savings wiped out by rising inflation are unlikely to be beneficiaries. We also think the move could not only help to exacerbate the current difficult operating environment for firms, but would also lead to an increase in cost of funds for net borrowers and thus, dampen corporate investments,” he said.
President, Manufacturers Association of Nigeria (MAN), Dr. Frank Jacobs noted that the only way to industrialise and encourage diversification is when loans are less than 10 per cent, adding that the MPR at three per cent might transform the banking sector to fund SMEs and other vibrant sectors of the economy.
“The overall effect of the MPR is not good for the manufacturing sector. No one is investing in the economy, both local and international investors. Access to cheap funds is key in driving investments in the real sector. What this means is that many manufacturers may close down and this may lead to job loss”, he added.
For the Lead Director of Centre for Social Justice, Eze Onyekpere, there seems to be a debilitating fixation with monetary policy and what happens to the value of the naira, with all eyes on the Central Bank of Nigeria and its Monetary Policy Committee.
“While monetary policy is important, it will not achieve the desired results if it is not complemented by fiscal policy. The expectation and promise of the administration to reflate the economy with a stimulus package would have matched the monetary policy positions of the CBN. We may not have exactly seen Nigeria in this recession.
“There is unusual delay in implementing the budget, may be, due to paucity of resources which raises issues around budget planning and revenue forecasting for the 2016 federal budget. The full implementation of the capital components of the 2016 federal budget is imperative,” he said.
Meanwhile, a currency and Research analyst at FXTM, Lukman Otunuga, who expressed his surprise over the decision, noted that this is the second time interest rates have been raised within six months in an effort to mitigate the mounting pressures on a weakening Naira. “With the current rates at 14 per cent, this has been the highest level ever and displays how the central bank will do all it must to guide the nation back onto the path of economic recovery.
“Sentiment still remains bearish towards Nigeria, and the recent decline in oil prices may punish the nation further. As of now, Naira vulnerability may be a theme and further declines in value could be expected as the local currency is guided by the natural forces of supply and demand.“It should be kept in mind that the nation’s problem remains depressed oil prices and the key is diversification, which could throw up some benefits in the longer term,” he added.
The Central Bank of Nigeria (CBN) has directed banks to review and provision for non-performing loans denominated in foreign currencies.
CBN Director, Banking Supervision, Mrs. Tokunbo Martins, who made this known in a letter to all the banks titled: Provisioning for foreign currency loans, said the exercise was in continuation of the regulator’s efforts to enhance efficiency, facilitate liquidity and transparency in the foreign exchange market.
This is happening as the naira yesterday weakened to an all-time low of N334.50 against the dollar on the interbank market, a day after the CBN hiked interest rates to lure foreign investors back into local assets, traders said.
The naira fell by 5.8 per cent from its opening rate, and $10 million was traded at the new record low. Traders said investors were pushing the currency lower to test the limit of how far it can fall, given a spread of almost 12 per cent between the official and black market naira rates.
At the parallel market, the naira was, however, exchanging at N376 to dollar.
“If we have more people trying to buy the naira then it should strengthen. I think we will keep seeing the trickles … I don’t think we will see large inflows until the fundamentals of the economy improves,” one trader told Reuters.
On the foreign currency loans, Martins explained that the CBN issued the Revised Guidelines for the Operations of the Nigerian Inter-bank Foreign Exchange Market meant to liberalise the foreign exchange market and increase balances on foreign currency-denominated loans and advances in the books of banks.
The target loans also include those 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.
