By Amechi Ogbonna with agency report
The Central Bank of Nigeria (CBN) may have approved the write off of some banks’ bad loans for which provisions have been made to help clean up their balance sheets.
The lifeline comes amidst pressures on banks, whose loan books have been hit by shrinking economy, falling currency and foreign exchange shortages following the slump in oil prices.
Several commercial banks had requested the apex bank to amend its rule requiring them to keep non-performing loans (NPLs) on their books for one year even after they have been fully provided for.
It was on the basis of this request that CBN granted them permission to write off these bad loans but on a one-off basis that applies until the end of this year.
“In view of the current macro-economic challenges … the CBN hereby grants a one-off forbearance, this year 2016, to banks, to write off fully provided NPLs without waiting for the mandatory one year,” the bank said in a circular dated July 28 and published on its website on Tuesday.
This forbearance is coming as Nigerian banks’ NPLs are expected to hit to 12.5 per cent of total loans this year, up from a target of 5 per cent at the end of last year, as banks suffer a hangover from an oil industry credit boom that ended abruptly in 2015, according to Augusto & Co, Nigeria’s main rating agency.
Last week, Diamond Bank said its NPLs ratio rose to 8.9 per cent by the first half, but expects it to fall to 7.5 percent by year end, while FCMB expects to restructure 25 per cent of oil and gas loans in the third quarter after it restructured 50 per cent of those loans last year.
Asset Management Corporation of Nigeria (AMCON), which was set up in 2010 to absorb bad loans during the country’s financial crisis, has said it has stopped buying NPLs and is now focused on recoveries.
AMCON, Nigeria’s “bad bank”, has said any decision to allow it to acquire NPLs would be up to the government and central bank.
Earlier this month, the CBN shored up mid-tier lender, Skye Bank, with a loan and replaced its management after its capital fell below levels required by regulators.
The central bank has also told banks to set aside extra capital buffers against their dollar loans immediately in the wake of a 40 per cent fall in the value of the naira.
On Tuesday, the naira hit an all-time low of N350 to the dollar in a single interbank market trade of $100,000. It later recovered to close at N310.50 after CBN’s intervened.
Also, the central bank has banned lenders from participating in the interbank currency market on days they access its lending window in order to curb speculation.
…Denies subsidising forex for hajj pilgrims
•Pegs BDC forex disbursement at $5,000
By Omodele Adigun
Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, says neither his bank nor the Federal Government subsidised foreign exchange for 2016 hajj pilgrims.
The clarification comes as its earlier circular last week showed that 65,167 pilgrims would get forex at N197 to a dollar, as against the current foreign exchange policy of about N380 to the dollar.
The presidency had in similar vein denied the subsidy, saying there was no discrimination against Christian pilgrims.
While defending the Presidency, Emefiele said the deal between the CBN and the pilgrims was consummated long before the new forex policy was implemented.
“Pilgrims made what is called advance payment for their personal travel allowance, in this case $750,” he said at a press conference in Abuja.
“They make those advance payments to the state pilgrims board, and then the state passes it to the national body, which in this case had reached an agreement with the CBN about the appropriate rate that would be used.
“For 2015, it is important for me to go back. In 2015, when the market rate was N197, the Pilgrims Commission, Christians and Muslims, came to the central bank and agreed at N160 to the dollar, even when the market was N197. That was an agreement and a contract reached.
“For 2016, the Pilgrims Commission came to the CBN and we agreed that it had to be done at the market rate, which at that time was N197.”
Emefiele said it would be against business ethic to direct the pilgrims to pay the difference in the old and new forex rate, on a previously-signed contract.
“The contract was reached some time around March and April this year. I think it would be inappropriate at this time, because the exchange rate has adjusted, that we should go back to the pilgrims and say, ‘pay the difference’.”
Meanwhile, the apex bank has pegged the disbursement of foreign exchange (forex) to end users by Bureaux de Change (BDC) at $5,000 per transaction, just as they are to buy a maximum of $30,000 per week from their agent banks.
In a circular entitled, “Re: Sales of Foreign Currency Proceeds of International Money Transfers to Bureaux de Change Operators” by its Acting Director, Trade and Exchange Department, W. D. Gotring, to all the authorised dealers and the BDC yesterday (Tuesday), the apex bank said all the authorised dealers of approved International Money Transfers Operators (IMTO) “shall sell foreign exchange cash to the BDC subject to a maximum of $30,000 per week,” while funds purchased by the BDC “shall be disbursed for Business Travel Allowance (BTA)/Personal Travel Allowance (PTA) and overseas school fees at the maximum disbursement per transaction not exceeding $5,000.”
Other conditions set by CBN include the following:
“A BDC shall nominate its preferred authorised dealer (deposit money bank{DMB}) and can only procure the said amount from only that bank of its choice in a week. Any breach of this condition will attract appropriate sanction.
“The selling rate by the authorised dealers to BDCs shall be the buying rate from the IMTO plus a margin not exceeding 1.5 per cent, and should be sold to end-users at a rate not exceeding 2 per cent margin above the buying rate.
“Authorised dealers shall continue to render weekly returns on sales to BDCs and the BDCs shall also continue to render weekly returns on purchases from the authorised dealers.
“Record shall be maintained for all transactions by the BDCs showing BVN of the end user, including endorsement of the amount endorsement of the amount disbursed in the international passport of the beneficiary. IMTOs shall continue to render weekly returns on their operations with agent banks directly to the CBN.”