The Central Bank of Nigeria has insisted that commercial banks in the country cannot use their foreign exchange revaluation gains to pay dividends or meet operational expenses.
The apex bank made this known in a circular on Thursday by the acting Director of the Banking Supervision Department, Adetona Adedeji.
It warned banks against using their FX revaluation gains to pay dividends and other operational costs.
“Further to our letter dated September 1, 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 FCY revaluation gains as a counter-cyclical buffer to cushion any adverse movements in the FX rate.
“In this regard, banks shall not utilise such FX revaluation gains to pay dividends or meet operating expenses.”
In September 2023, the CBN had directed deposit money banks to stop utilising gains from their foreign exchange revaluation for dividends and operational expenditures.
Forex revaluation gains occur when there is an increase in the value of a bank’s assets and liabilities denominated in foreign currency due to a change in the exchange rate between the foreign currency and the local currency.
CBN floated the Naira twice between June 2023 and this year, leading to the currency exchanging at N1,608.98 per US dollar at the forex market on Thursday, March 14 2024, from N460 per USD in May 2023.
