CBN Issues New Directives On Forex

The Central Bank of Nigeria, CBN, yesterday, set a new limit of $30, 000.00 per week for the sale of foreign exchange cash from the Authorised Dealers, ADs to Bureau de Change, BDCs, just as the Naira depreciated to N350 per dollar. Governor of the apex bank Mr Godwin Emefiele also warned Authorized Dealers to desist from accessing its Discount Window on the settlement date for government securities' auctions. 

The securities are CBN Bills, Nigerian Treasury Bills and Federal Government of Nigeria Bonds. A CBN Circular Ref: FMD/DIR/GEN/CIR/07/005 to all authorised Dealers titled
"Access to the CBN Discount Window" signed by Director, Financial Market Department, CBN, Dr. Alvan E. Ikoku, disclosed that the directive was issued based on observed abuse of access to the CBN Standing Lending Facility by authorised dealers.The CBN warned the authorised dealers to comply as any violation will result in their denial of access to its Standing Lending Facility.

In another circular Ref: TED/FEM/FPC/GEN/01/006 titled "Re: Sales of Foreign Currency Proceeds of International Money Transfers to Bureau De Change Operators" signed by the CBN's Acting Director, Trade & Exchange Department, W.D. Gotring it stated " Authorised Dealers shall sell foreign exchange cash to BDCs subject to a maximum of $30,000.00 per week. A BDC shall nominate its preferred Authorised Dealer (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 circular further stated that "the selling rate by the Authorised Dealers to BDCs shall be the buying rate from International Money Transfers Operators, IMTSOs plus a margin not exceeding 1.5 per cent; Foreign exchange cash purchased by BDCs from Authorised Dealers (Ads) 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 shall be applicable to all funds to be retailed by BDCs regardless of source of fund; 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 ADs as specified in the attached excel format to Trade & Exchange Department, CBN , Abuja."

Other requirements in the circular include: "Funds purchased by BDCs shall be disbursed for the following eligible transactions only. In all cases, the maximum disbursement per transaction shall not exceed $5,000.00 for (a) Business Travel Allowance/ Personal Travel Allowance (b) Overseas School fees and (c) Overseas Medical fees."

The CBN in the circular said "Record shall be maintained for all transactions by the BDCs showing the BVN of the end-user, including endorsement of the amount disbursed in the International Passport of the beneficiary; International Money Transfer Service Operators shall continue to render weekly returns on their operations with agent banks directly to the CBN as specified in the attached format.; All BDCS are required to render weekly returns on foreign exchange purchases from Authorised Dealers and other sources as well sales to the Director, Trade and Exchange Department as specified in the attached excel format.

Also yesterday CBN confirmed it will allow banks to write off bad loans for which they have already made provisions to help them to clean up their balance sheets this year. Pressure has been building on the country's banks, whose loan books have been hit by Nigeria's shrinking economy, plunging currency and foreign exchange shortages following the slump in oil prices. Banks had asked the CBN to amend its rule requiring them to keep non-performing loans on their books for one year even after they have been fully provided for.

The Central Bank has granted them permission to write off these bad loans but this will be a one-off that will only apply 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.

Non-performing loans are expected to jump to 12.5 percent of total loans this year, up from the central bank's target of 5 percent 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 non-performing loan ratio rose to 8.9 percent by the first half, but expects it to fall to 7.5 percent by year end. Rival FCMB expects to restructure 25 percent of oil and gas loans in the third quarter after it restructured 50 percent of those loans last year.