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Bad Loans Rising, Dollar Scarcity to Continue — CBN



  • Bad Loans Rising, Dollar Scarcity to Continue

The scarcity of foreign exchange will remain challenging in the second half of 2016 due to low oil prices, which may push up credit risks for commercial banks as naira weakness makes loans harder to service, the Central Bank of Nigeria has said.

In its half-year Financial Stability Report, the CBN said the move to a flexible exchange rate regime had led to a sharp fall in the naira and contributed to the decline in asset quality for the banking sector.

“Although the outlook for the rest of the year appears to be challenging, the current measures put in place … are expected to minimise the impact of shocks to the domestic economy,” the report said.

The CBN had floated the naira in June to conserve the external reserves, resolve a chronic dollar shortage, and lure foreign investors who fled as a slump in oil prices pushed the economy into its first recession in 25 years.

Dollar scarcity has persisted after the 16-month-old naira peg of 197/dollar was lifted, however, frustrating businesses which need dollars to pay for imports.

The naira has weakened to as low as 490 per dollar on the black market in recent weeks while holding firm at around 305 on the official market, supported by central bank interventions, Reuters reported.

The National Bureau of Statistics said on Wednesday that the economy was likely to shrink by 1.3 per cent in 2016, a sharp downward revision of its estimates prompted by the naira’s fall after dollar peg was dropped.

The CBN Governor, Mr. Godwin Emefiele, told depositors and investors not to panic about the state of the banking system, saying he was on top of the economic crisis.

The regulator said credit risk could rise into the second half of the year due to higher loan charges and debtors’ inability to service dollar borrowing, particularly oil and gas loans.

“The increasing quantum of non-performing loans posed a major concern for regulators in the review period,” the CBN said on Wednesday, adding that it had enhanced supervision of loans to the oil and gas sector and the currency market.

Non-performing loans are expected to rise in the second half, after they hit 11.7 per cent in the first half, above the CBN’s five per cent limit, according to the CBN.

The NPLs stood at 5.3 per cent at the end of last year.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Nasdaq,, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Banking Sector

CBN Extends Letter of Credit Issuance Timeline Amid Forex Crisis

Move Aims to Address FX Scarcity Challenges and Enhance Customer Service



Central Bank of Nigeria (CBN)

The Central Bank of Nigeria (CBN) has announced an extension of the timeline for issuing letters of credit from 24 hours to five working days, according to the newly approved 2023 service charter.

This adjustment comes as the country grapples with foreign exchange scarcity, impacting local and international trade.

The 2020 service charter initially stipulated a 24-hour timeline for the issuance and management of letters of credit, but the updated charter now reflects a timeline extension to five working days.

Also, the CBN has prolonged the timeline for the registration of Form M and NXP from 24 hours to two working days.

The move follows the CBN’s unification of all forex market segments in June 2023, aimed at promoting liquidity and stability.

However, this measure appears to have led to increased market instability, with the naira losing nearly a fifth of its value.

Reports indicate that foreign suppliers are now rejecting letters of credit from Nigerian businesses, affecting the importation of goods and services.

Letters of credit are crucial for the payment of visible goods imports, wherein a bank commits in writing to pay the exporter a specified sum within a defined timeframe upon receipt of proper documentation from the customer.

The extended timelines for letters of credit, Forms M, and NXP in the service charter are seen as measures to manage cash flow and instill confidence in the process amidst the ongoing forex crisis.

CBN Governor Yemi Cardoso stressed the commitment to responsive and citizen-friendly governance through efficient, responsible, and transparent service delivery in the revised service charter.

The move is part of the CBN’s effort to comply with the Business Facilitation Act 2022 and enhance ease of doing business in Nigeria.

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Banking Sector

Unity Bank MD Advocates Policy Actions to Stem Gender-Based Violence in Nigeria



The Managing Director of Unity Bank Plc, Mrs. Tomi Somefun has called for comprehensive policy actions that will dismantle the structures that enable gender-based violence in Nigeria.

At the Ebony Life Cinema, the venue of the film screening in Lagos, Unity Bank supported the BECKMA movie premiere by ARDA Development Commuications Inc. which was held to highlight issues of Gender-Based violence and driving positive change in society.

Making the call, Somefun stated that the Bank committed to partnering with the movie premiere and putting the power of the brand behind BECKMA as the event brings sustainability and gender equality to the front burner.

Represented by Unity Bank’s Group Head of Compliance, Mrs. Patricia Ahunanya, Somefun noted that “9 percent of women aged 15 to 49 had suffered sexual assault at least once in their lifetime and 31% had experienced physical violence,” citing a recent study by UNDP in Nigeria.

Speaking further, Somefun said “Gender-based violence is not just a women’s issue, but a societal ill that demands our collective attention. It is high time for us to step forward and advocate for comprehensive policy actions that will dismantle the structures allowing such atrocities to persist”.

She added, “I urge policymakers to enact stringent laws against gender-based violence, ensuring swift and severe consequences for perpetrators. Our homes and various organisations must also be a catalyst for change, inspiring others to follow suit.”

While commending the ARDA Development Communications Inc. for their initiatives to promote gender equality and empowerment in line with SDG5, Somefun assured of the Bank’s commitment to sustainable initiatives and further collaborative initiatives and advocacy programmes for the elimination of gender-based violence.

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Banking Sector

Nigeria’s NIBSS Directs Banks to Disconnect Non-Deposit Financial Institutions from NIP System



Central Bank headquarters

Banks in Nigeria have received a directive from the Nigeria Inter-Bank Settlement System (NIBSS) to disconnect Switches, Payment Solution Service Providers (PSSPs), and Super Agents from the NIBSS Instant Payment Outwards System.

The circular, dated December 5, 2023, highlighted that including these non-deposit-taking financial institutions as beneficiaries on the NIP funds transfer channels violates the Central Bank of Nigeria (CBN) guideline on electronic payments.

The NIBSS emphasized that while Switches, PSSPs, and Super Agents might process outward transfers as inflows to banks, their licenses do not permit them to hold customers’ funds.

The circular referred to the CBN’s guidelines on electronic payment of salaries, pensions, suppliers, and taxes, dated February 2014, as the basis for this regulatory stance.

The directive also pointed to a circular dated May 11, 2018, titled “Permissible Services and Products of PSSP Operation in Nigeria,” reinforcing the need for compliance.

As a result, banks were urged to delist all Switches, PSSPs, and Super Agents from the NIP Outward Transfer channels while allowing their participation in inward transfers.

In Nigeria’s payment ecosystem, operators are required to obtain licenses such as Switching and Processing, Mobile Money Operations, Payment Solution Services, or Regulatory Sandbox from the CBN.

Only Mobile Money Operators (MMOs) have the authority to hold customer funds, according to the CBN’s regulatory framework.

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