The apex bank, Central Bank of Nigeria (CBN), has issued new guidelines to all banks including Deposit Money Banks (DMBs) and Discount Houses (DHs), on internal capital generation and dividend payout ratio. The new guidelines, issued via a circular (the Circular) referenced BSD/DIR/GEN/LAB/11/002 and dated 31 January 2018, becomes effective immediately.

Under the new guidelines, banks are now required to ensure that their composite risk rating (CRR), minimum capital adequacy ratio (CAR) and non-performing loan (NPL) ratio are within the prescribed thresholds set out by CBN before dividend can be paid out to shareholders.

Major highlights of the Circular are presented below.

Dividend pay-outCriteriaNo dividend pay-outBanks with “High” CRRNPL ratio of above 10%Restricted to pay-out ratio of 30%Meet the minimum CAR“Above average” CRRNPL ratio greater than 5% but less than 10%Restricted to 75% of profit after taxBanks with CAR of at least 3% above the minimum requirementCRR of “Low”NPL ratio greater than 5% but less than 10%No restrictionMeet the minimum CARCRR of “Low” or “Moderate”NPL ratio of not more than 5%The Board of such institutions are urged to recommend pay-outs based on effective risk assessment and economic realities

In addition to the above, the following are also applicable;

No DMB or DH shall be allowed to pay dividend out of reserves.Banks shall submit their Board approved dividend pay-out policy to the CBN before payment of dividend shall be permitted.

The Circular is an attempt by CBN to address the worrying trend of financial institutions paying out a significant proportion of their profits as dividend, irrespective of their risk profile and without regard to the need to build resilience through adequate capital buffers. It is also expected to engender a culture where banks use retained earnings as an important source of growing their capital.

The post CBN restricts dividend pay-out by banks appeared first on Deloitte Nigeria Blog.


SOURCE: https://brandspurng.com/cbn-restricts-dividend-pay-out-by-banks/

Ooook

have learnt how to be ftp

If messi no massacre Chelsea today ehn, OK night go soon reach.
All roads lead to BARCELONA...

3html:
have learnt how to be ftp

I don't think you can ever have sense again

Interesting

ok

I no understand wetin dem write there! Biko someone should break it down in lay man's term ooo

looks like I'm reading further math questions! Pls y'all bankers in the house come and help your folks!

That's good from CBN before this Directors and crude managements will send these firms to the grave.

it's good to note that this policy was adopted 2014

Trial n error don start again

CBN in the news this morning . Means more money in circulation. O God, please I must share in this oooo. Make we plan nah. Wey the financial gurus in the house biko?

stolenstone:
I no understand wetin dem write there! Biko someone should break it down in lay man's term ooo

Banks are listed in the stock exchange and are funded by their shareholders. As a way to reward the shareholders, they pay out dividends (a part of their profit, after removing expenses).

Before these dividends are paid, a bank also removes some part of its net profit and put it in their reserves. This is to ensure that if there is any loss, the banks can recover from it. Just like your normal savings.

Apparently, some banks are using a large percentage of their profits to pay out dividends or dipping it's hands into its reserves. You won't use your savings to buy human hair to satisfy your friends right?

Now, there is a capital adequacy ratio and this means that all banks must have a certain amount of capital with the CBN to operate in Nigeria. I think it is currently 50 billion naira. This is also another shock absorber reserve.

There is also the composite risk rating which places banks into different categories depending on their strengths and weaknesses.

The NPL is the non performing loan ratio which considers the number of loans that the bank gives that are not being repaid. If you give out 80% of your money on loan and people are not repaying, you shouldn't be giving out loans at all.

CBN is simply saying that you should pay out dividends according to your capital and risk profile.

This is as far as I can understand. I hope it makes sense.

Adebowhales:
If messi no massacre Chelsea today ehn, OK night go soon reach.
All roads lead to BARCELONA...

Mhen, don't let's go down this road on this thread cos nah wetin everybody go dey discuss not wetin we no understand

Can't believe I read through and realised it doesn't really concern me. E pain me aswear.

the dividend thing na rubbish. until they remove the 6months expiry date, I received all my dividends from banks 6-7months ,I spend 700naira for transportation to validate the date on my dividend cheque just because I wan pay ln 103 naira dividend thing in to my account,
that one na profit abi na loss

English please??

I understand not.

Lunagirl:


Banks are listed in the stock exchange and are funded by their shareholders. As a way to reward the shareholders, they pay out dividends (a part of their profit, after removing expenses).

Before these dividends are paid, a bank also removes some part of its net profit and put it in their reserves. This is to ensure that if there is any loss, the banks can recover from it. Just like your normal savings.

Apparently, some banks are using a large percentage of their profits to pay out dividends or dipping it's hands into its reserves. You won't use your savings to buy human hair to satisfy your friends right?

Now, there is a capital adequacy ratio and this means that all banks must have a certain amount of capital with the CBN to operate in Nigeria. I think it is currently 50 billion naira. This is also another shock absorber reserve.

There is also the composite risk rating which places banks into different categories depending on their strengths and weaknesses.

The NPL is the non performing loan ratio which considers the number of loans that the bank gives that are not being repaid. If you give out 80% of your money on loan and people are not repaying, you shouldn't be giving out loans at all.

CBN is simply saying that you should pay out dividends according to your capital and risk profile.

This is as far as I can understand. I hope it makes sense.

Cool. But won't this action discourage investors from buying shares? I mean, some of shares bought may have been sourced from loans.

ceejay80s:
the dividend thing na rubbish. until they remove the 6months expiry date, I received all my dividends from banks 6-7months ,I spend 700naira for transportation to validate the date on my dividend cheque just because I wan pay on 103 naira dividend thing in to my account

Brotherly, i can relate

Can we have the names of the affected banks, please?

danielnike:


Cool. But won't this action discourage investors from buying shares? I mean, some of shares bought may have been sourced from loans.

No, it should strengthen investors confidence.
A serious investor will know that you have to make room for loss, if you keep on spending your profit, without making provision for your loss, when that loss comes, you might not be able to absorb the shock.

Buhari is really working oooooooooo

Nigeria external reserves to hit 54 months high of $45bn

Read more at: https://www.vanguardngr.com/2018/02/eurobond-nigeria-external-reserves-hit-54-months-high-45bn/



NIGERIA’s external reserves will rise to 54 months high of $45 billion this month following the conclusion of federal government’s $2.5 billion Eurobond this week. The Eurobond, which commenced last week with the announcement of its pricing on Thursday, will be concluded on Friday. According to the Ministry of Finance, the $2.5 billion Eurobond, which attracted buying interest of $11.5 billion, comprises a $1.25 billion 12-year series and a $1.25 billion 20-year series.

The 12-year series comes with interest at a rate of 7.143 percent, while the 20-year series will bear interest at a rate of 7.696 percent, and, in each case, will be repayable with a bullet repayment of the principal on maturity. The offering is expected to close on or about February 23, 2018, subject to the satisfaction of various customary closing conditions. Eurobonds Though the purpose of the Eurobond issuance is to refinance domestic debts, proceeds of the bond will, among other things, accelerate accretion to the nation’s external reserves. Commenting on how the Eurobond issuance will impact the domestic economy, analysts at Lagos based investment firm, Afrinvest Plc, said: “The proceeds from the Eurobond issuance would be used to refinance relatively expensive short term domestic borrowings as the FGN plans to achieve an optimal mix of domestic and foreign debt and reduce overall debt servicing cost.

The impact of the debt refinancing, coupled with declining inflation rate and stability in foreign exchange rate, is anticipated to continue to anchor yield expectation lower in the near term and reduce crowding out of private sector borrowers.” External reserves accretion Financial Vanguard analysis reveals that the external reserves have grown by $3.5 billion or 8.9 percent since the beginning of the year.

According to the CBN, the external reserves which opened the year at $39.3 billion had risen to $42.8 billion last week. The sharp increase in reserves is driven by rising crude oil price, which touched $71 per barrel last month before retreating to $62 per barrel last week, as well as upsurge in dollar inflows through the Investors and Exporters (I&E) window of the foreign exchange market. Financial Vanguard analysis showed that turnover (dollars traded) in the I&E window rose by 10 percent last week to $789.9 million from $716.57 million the previous week. Consequently dollar inflow since the beginning of the year through the I&E window rose to $8.37 billion, from $7.58 billion the previous week. Mixed naira performance However, in spite of the increased turnover, the naira depreciated marginally in the I&E window last week. According to data from the Financial Market Dealers Quote, the indicative exchange rate for the window rose by 9 kobo to N360.36 per dollar last week from N360.27 the previous week. But the naira remained stable at N363 per dollar in the parallel market during the week.

The CBN on its part sustained its weekly intervention in the foreign exchange market by selling $210 million in the interbank market. According to Acting Director, Corporate Communications Department, CBN, Mr. Isaac Okoroafor, “The CBN offered $100 million to authorized dealers in the wholesale segment of the market, while the Small and Medium Enterprises (SMEs) segment got the sum of $55 million. Customers needing foreign exchange for invisibles such as tuition fees, medical payments and Basic Travel Allowance (BTA), among others, were also allocated the sum of $55 million.” Statutory allocation funds to lower cost of funds Cost of funds is expected to further trend downwards in the interbank money market this week courtesy of inflow from statutory allocation to the three tiers of government which would be released this week by the Federal Accounts Allocation Committee (FAAC). The inflow, in addition to N56.3 billion inflow from maturing treasury bills (TBs) is expected to offset impact of outflow to be occasioned by N100 billion FGN Bond offer by Debt Management of Nigeria (DMO) this week; dollar auction by the CBN; and likely mop-up by CBN through secondary market (open market operations, OMO) TBs sale. Last week, cost of funds fell sharply by over 2,500 basis points (bpts) following upsurge in market liquidity to N371.5 billion on Friday from N46.4 billion the previous week.

The upsurge in liquidity was buoyed by inflow of N266 billion from matured TBs, which offset the impact of outflow of N176 billion through primary market (new) TBs sold by the CBN during the week. Consequently, interest rate on Collateralised (Open Buy Back, OBB) lending dropped by 2,516 bpts to 18.17 percent last week from 43.33 percent the previous week. Similarly, interest rate on Overnight lending dropped by 2,600 bpts to 19.5 percent from 45.5 percent the previous week.

Read more at: https://www.vanguardngr.com/2018/02/eurobond-nigeria-external-reserves-hit-54-months-high-45bn/

They are mad, how much dividend were dy paying b4 and its not even constant, y didn't dy tell us of development wen we were buying d shares from dem abi no be money we give dem ni?

ceejay80s:
the dividend thing na rubbish. until they remove the 6months expiry date, I received all my dividends from banks 6-7months ,I spend 700naira for transportation to validate the date on my dividend cheque just because I wan pay ln 103 naira dividend thing in to my account,
that one na profit abi na loss

you better sell those shares
as they're losing tou 600 naira annually

Proudlyngwa:

No, it should strengthen investors confidence.
A serious investor will know that you have to make room for loss, if you keep on spending your profit, without making provision for your loss, when that loss comes, you might not be able to absorb the shock.

What of those that bought the stock? I'm not even talking about the banks.