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CBN directs banks to extend dollar loans

CBN directs banks to extend dollar loans

The Central Bank of Nigeria (CBN) has directed commercial banks to immediately start the process of extending dollar loans to their customers.

This is seen as a last resort in the apex bank’s attempt to shore up the dwindled fortune of the naira, which has seen it exchange N325 to a dollar.

Since June, when Nigeria ditched its old system of pegging its currency at N197 to a dollar, naira has defied any measure to see it revert near its former value.

Though government said it changed its former policy in order to lure back foreign investors, who had fled after a plunge in the price of oil, the local currency has since then lost about 45 per cent of its former value.

The directive, which takes effect from this week, is described by the bankers’ bank as being in line with an already existing practice, which had seen most loans domesticated in dollars.

“It is a measure aimed at harmonising what has been in place, but which commercial banks needed approval before utilising it,” said a CBN spokesman.

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He said with this, the banks would now start a new practice of restructuring their loan books.

In a circular issued last week, the central bank instructed lenders to send evidence of the extra provision of hard currency in their vaults by this week.

The naira hit 324 to the dollar on Monday, near a record low of 334.50 touched last week. It later firmed to end at 315.50 after the central bank intervened with dollar sales.

The regulator has not quantified the increased in the balances of banks’ dollar loan books but hoped to use this method to help the naira substantially.

Given the pressure that the naira is facing with the acute shortage of foreign exchange, since the slump in the oil price, nothing that could be done legitimately for its survival that CBN will be against, it further stated.

Non-performing loans are expected to jump to 12.5 percent of total loans this year, up from the central bank’s target level of 5 per cent at the end of last year, as lenders suffer a hangover from an oil sector credit boom that ended abruptly in 2015, according to Agusto & Co, Nigeria’s main rating agency.

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We are an online newspaper, very passionate about Nigerian politics, business and their leaders. We dig deeper, without borders and without fears.
www.ripplesnigeria.com

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