As a result of the devaluation of Naira in Nigeria, Banks posted higher earning performance, driven by revaluation gain.
However, the Central Bank of Nigeria (CBN) maintained its position that deposit money banks must not use foreign currency gains recorded in 2023 to pay dividend or offset operation expenses.
According to an unaudited financial statement posted on the Nigerian Exchange, Tier 1 banks pushed their earnings higher due to gains from their string net open position. Some smaller lenders incurred cost as a result of their respective exposures to foreign currency liabilities.
However in order to neutralise devaluation effects on banks’ books, the CBN directed banks to sell down their foreign currency holding to reduce exposure and as an effort to sanitise the forex market in 2024.
“Further to our letter dated Sept 11 2023 which referenced the impacts of FX policy reforms: prudential guidelines for banking sector, the CBN wishes to reiterate that banks are required to exercise utmost prudence and set aside foreign currency revaluation gains as a counter-cyclical buffer to cushion any adverse movement in FX rate.
“In this regard, banks shall not utilise such FX revaluation gains to pay dividends or meet operating expenses,” a circular signed by Dr, Adetona Adedeji who is CBN Acting director, banking supervision, stated.
