CBN grants request of banks to write-off 2016 NPLs

…. Limits access to discount window

By Odunewu Segun

The Central Bank of Nigeria 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 as stipulated by the Prudential Guidelines.

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.

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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, Nigeria 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.”

Meanwhile, the naira appreciated by N3.16 against the dollar at the interbank market to close at N312.50 yesterday, while it remained unchanged at N395 at the parallel market.