Business
CBN Gives Fresh Directives To Banks On FX Revaluation Gains
FX revaluation gains refer to the increase in the value of a bank’s assets and liabilities denominated in foreign currency…
The Central Bank of Nigeria (CBN) has issued a directive instructing commercial banks on Monday to stop utilizing their foreign exchange revaluation gains for dividends and operational expenditures.
VerseNews reports that the new directive was conveyed in a letter dated September 11, 2023, signed by the Director, Banking Division Department, Haruna Mustafa, and it is expected to be implemented immediately.
This Online News Website understands that FX revaluation gains refer to the increase in the value of a bank’s assets and liabilities denominated in foreign currency when there is a change in the exchange rate between the foreign currency and the local currency.
The CBN said it had assessed the consequences of the recent FX rate regime change on the banking system and identified its potential to substantially impact the Naira values of banks’ foreign currency (FCY) assets and liabilities.
The FX reforms negatively affected some businesses in the first quarter of 2023, but Nigerian banks were largely profitable.
According to the lender, FX revaluation gains must serve as a counter-cyclical buffer to safeguard against potential adverse FX rate fluctuations.
The CBN emphasized that banks should utilize these revaluation gains to reinforce their capital reserves, thus enhancing the banking sector’s capacity to endure volatility and economic shocks.
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