Apex bank directs banks to write off all forex bad debts

Media reports confirm that the 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 comes after a steep rise in hard currency debts in the nation’s banks was discovered following its revised guidelines on the operations of the Nigerian Inter-bank foreign exchange market.

According to the reports, Mrs. Tokunbo Martins, director of Banking Supervision at the CBN in a statement sent to all banks yesterday, frowned at the increase in 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," the statement read.

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

"Also, 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.”