The Central Bank of Nigeria (CBN) has directed that all commercial banks should make provision for all foreign currency-denominated loans in continuation. This follows the liberalization of the foreign exchange market, which saw the naira depreciate in the past few weeks.
According to the CBN, one of the effects of the new FX guidelines 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.
“Consequently, to ensure adequate and proper provisioning, banks are now 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” the apex bank said in a circular posted on its website on 27 July 2016.
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, the CBN said.
