CBN Conducts Special Examination on Banks

·Eyes on NBS as Kale’s tenure ends today

Obinna Chima

In order to ascertain the actual well-being of banks owing to the nation’s macroeconomic challenges and rising non-performing loans (NPLs), the Central Bank of Nigeria (CBN) is currently carrying out examination on banks.

At the end of the exercise, the banking sector regulator said, it would determine how best the industry should be supported.

The Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, disclosed this in response to enquiries from THISDAY.

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.
This is even worsened by the weakening consumer confidence and slide in the country’s Gross Domestic Product (GDP).

In view of the current macro-economic challenges in the country, the CBN last week announced that it had granted a one-off forbearance to banks this year to write-off their fully provided NPLs without waiting for the mandatory one year.

The CBN had explained that it acknowledged the request by banks to amend the requirements of Section.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 grants a one-off forbearance this year 2016 to banks, to write-off fully provided for NPLs without waiting for the mandatory one year,” Martins stated in the circular addressed to all banks.

In a related development, in view of what it described as the abuse of access to its Standing Lending Facility (SLF) by banks and other authorised dealers, the CBN has also 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.

Responding to THISDAY’s question on the need to conduct special examination on the banks to mitigate systemic risk in the industry, Martins stated: “I totally agree. We are currently carrying out examinations in that regard and also conducting stress test. At the end of it, we will determine how best the industry should be supported.”

Meanwhile, as the tenure of the Chief Executive Officer of the National Bureau of Statistics (NBS), Mr. Yemi Kale, ends today, financial market analysts have commended his contribution to the transformation of the country’s data system since his appointment in 2011.
The NBS has since 2011 grown as a reliable statistics body whose data have continued to be relied on nationally and internationally for effective planning.

Speaking on the achievement of the NBS boss since his appointment, Head of Research, SCM Capital Limited, Mr. Sewa Wusu, told THISDAY: “Kale has done significantly well. In terms of statistics on the Nigerian economy, such as inflation, GDP, and others that have really helped the economy in terms of planning and understanding the level at which the economy is performing, he has done very well.

“Today, we have series of data on the macro economy and that has helped in policy formulation and planning. Before Kale came, we didn’t have the robustness of most of the reports we are seeing now. To a large extent, the NBS has been living up to its expectation under Kale. That is what you enjoy when you have a round peg in a round hole. They know what to do at every point in time.

“More can still be done and he can still do more, that is why I am advising that his tenure be renewed. Lots of foreign investments banking firms now do proper analysis on the Nigerian economy because of the structured NBS data release timetable,” he stated.

One of Kale’s greatest achievements was seeing through the rebasing of Nigeria’s GDP which, in 2014 saw Nigeria emerge as the largest economy in Africa, a position, which it lost to South Africa recently. Among several other achievements including the unveiling of the Enhanced General Data Dissemination System (e-GDDS), which would help Nigeria attract the much needed Foreign Direct Investments (FDIs) into the country.

The e-GDDS is the data standards initiatives by the International Monetary Fund (IMF) which aims at enhancing member countries’ data transparency and promoting development of sound statistical systems. The page particularly serves as a one-stop publication vehicle for essential macroeconomic data.