The recent foreign exchange policy reforms, such as a ban on banks using their gains in foreign exchange to pay dividends to shareholders, had been strictly enforced by the Central Bank of Nigeria (CBN) ahead of the dividend payment season. Last year, the apex bank emphasized the importance of prudent financial management and risk mitigation, so banks were directed to exercise the greatest caution and set aside their gains from foreign currency revaluation as an anti-cyclical buffer to cushion any negative actions in the foreign exchange rate.
“Further to our letter dated September 11, 2023, referenced BSD/DIR/CON/LAB/16/020 on the above subject, the Central Bank of Nigeria wishes to reiterate that banks are required to exercise utmost prudence and set aside Foreign Currency (FCY) revaluation gains as a counter-cyclical buffer to cushion any adverse movements in the FX rate,” the apex bank wrote in a letter addressed to banks yesterday as well as signed by Dr. Adetona Adedeji, Acting Director, Banking Supervision.
“Banks are prohibited from utilizing the gains resulting from the FX revaluation to cover operating expenses or dividend payments.”