CBN Grants Forbearance to Banks to Write-off 2016 NPLs

•   Limits access to discount window, pegs dollar sales to BDCs at $30,000 weekly
•  Extends deadline for BVN registration for diaspora customers

Obinna Chima

In view of the current macro-economic challenges in the country, the Central Bank of Nigeria (CBN) has granted a one-off forbearance to banks this year to write-off their fully provided for non-performing loans (NPLs) without waiting for the mandatory one year.

The CBN stated this in a two-paragraph circular by its Director, Banking Supervision, Mrs. Tokunbo Martins, a copy of which was posted on its website yesterday.

Martins stated that the central bank acknowledged the request by banks to amend the requirements of S.3.21 (a) of the Prudential Guidelines, which mandates banks to retain in their records, fully provided NPLs for a period of one year before they are written off.

“The CBN has no intention of repealing the provision of the above mentioned section of the guidelines. In view of the current macro-economic challenges, however, the CBN hereby grant a one-off forbearance this year 2016 to banks, to write-off fully provided for NPLs without waiting for the mandatory one year,” she wrote in the circular addressed to all banks.

Banking sector NPLs have been predicted 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, according to Agusto & Co, Nigeria’s main rating agency.

In a related development, in view of what it described as the observed abuse of access to its Standing Lending Facility (SLF) by banks and other authorised dealers, the CBN yesterday announced measures to correct the anomaly.

To this end, the central bank in another circular by its Director, Financial Markets Department, Dr. Alvan E. Ikoku, directed all authorised dealers to refrain from accessing the discount window on the settlement date for government securities’ auctions.

The securities referred to are CBN bills, Nigerian Treasury Bills and Federal Government of Nigeria bonds.
It stressed that any violation of the directive would result in the denial of access to the SLF.

The central bank, in the four-paragraph statement, explained: “In view of the observed abuse of access to the CBN Standing Lending Facility by authorised dealers, it has become imperative that some measures be taken to redress the trend and to re-define the mode of operation by authorised dealers at the window.

“Thus, all authorised dealers are henceforth directed to refrain from accessing the discount window of the CBN on the settlement date for government securities’ auctions. All authorised dealers are hereby required to note and comply accordingly, as any violation will result in the denial of access to the CBN Standing Lending Facilty.

“You are reminded that authorised dealers who come to any CBN window are prohibited from the interbank foreign exchange market on the same day.”

On the interbank market, the naira appreciated by N3.16 against the dollar yesterday to close at N312.50, stronger than the N316.66 to the dollar at which it closed the previous day.

But on the parallel market, the naira was unchanged as it closed at N395 to the dollar yesterday.

Meanwhile, in a separate circular yesterday, which was in furtherance to its recent directive that banks that act as agents to approved international money transfer operators (IMTO) to sell foreign currency accruing from inward money remittances to licenced Bureau De Change (BDC) operators, the central bank yesterday fixed a maximum limit of $30,000 per week as what banks can sell to the BDCs.

The circular from the Director, Trade and Exchange Department, CBN, W.D. Gotring, also stated that a BDC operator shall nominate its preferred authorised bank and can only procure the said amount from only that bank of its choice in a week.

It warned that any breach of the condition would attract sanctions.
“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. Foreign exchange cash purchased by BDCs from authorised dealers shall be sold to foreign exchange end-users at a rate not exceeding two per cent margin above the buying rate.

“For the avoidance of doubt, the two per cent margin stated above shall be applicable to all funds to be retailed by the BDCs regardless of sources of funds.
“Authorised dealers shall continue to render weekly returns on sales to BDCs and the BDCs shall also continue to render weekly returns on purchases,” it added.

Furthermore, the central bank stressed that funds purchased by BDCs shall be disbursed only for Business Travel Allowance/Personal Travel Allowance, overseas school fees and overseas medical fees, and should not exceed a maximum disbursement per transaction of $5,000.

Also, in its bid to ensure that all Nigerian customers in the diaspora get their Bank Verification Numbers (BVN), the central bank in another circular, said it has re-opened the scheme.

The enrolment for diaspora customers would now run from August 1st to December 31st, 2016.
Director, Banking and Payment System, CBN, Mr. Dipo Fatokun, in a circular yesterday, advised all bank customers abroad to ensure that they have attached their BVN to their accounts from January 1st, 2017.

The central bank stated that the extension was done to ensure that it fully realises the objective of the BVN scheme.

“A survey at the end of January 2016, revealed a very low percentage of registration and the exercise was further extended to 30th June 2016. The Bank observed the need to expand the geographical spread of registration centres, therefore, a new consultant, Avante International Technology Incorporated, was engaged to join OIS and VFS in the registration of Nigerian bank customers in diaspora.

“The combined efforts of the consultants and some Nigerian banks abroad have greatly accelerated the enrolment of this category of bank customers.
“Consequently, to ensure that all Nigerian bank customers in diaspora are enrolled, the BVN enrolment for bank customers in diaspora is hereby reopened for the next five months,” it said.