Indications have emerged that a number
of foreign banks have started suspending short and medium-term credit
lines to their Nigerian counterparts as falling crude oil prices
continue to fuel exchange rate volatility and uncertainties in the
economy.
This is coming just as several Nigerian
lenders are said to be seeking extension on the settlement of their debt
obligations to the foreign banks.
Top bankers told our correspondent on
Tuesday that the overseas banks had been expressing deep concerns about
the ability of Nigerian banks to continue to meet up with all their
foreign currency denominated credit lines, especially maturing Letters
of Credit, as the external reserves continued to be depleted due to
falling oil revenue.
The situation has been further worsened by speculations over the possible devaluation of the naira after the February elections
Foreign lenders reduce credit to Nigerian banks.
This, according to banking sources, has made some of the foreign banks to suspend credit lines to some Nigerian banks.
It was further learnt that the Central
Bank of Nigeria’s regulations aimed at curbing speculative attack on the
naira had led to some delays in accessing foreign currencies by the
banks.
This, and other related issues, have
forced some of the banks to seek extension of their debt obligations,
especially maturing LCs to foreign banks.
Analysts, however, recalled that foreign
banks had suspended credit lines to Nigerian banks during the global
financial crisis of 2008 and 2009.
They said the foreign banks were fond of doing so whenever they sensed that a crisis would come.
However, addressing the issue of delay
in accessing forex to fund LCs at an interactive session with the
business community in Lagos on Tuesday, the CBN Governor, Mr. Godwin
Emefiele, said there was no reason to panic over the state of the
economy.
He said the CBN had recently introduced
some measures into the foreign exchange market in order to curb
speculative attack on the naira, adding that the volume of demand for
forex being witnessed lately was abnormal.
The governor, however, urged the
representatives of the foreign banks present at the event to continue
their business with Nigerian banks as usual, assuring them that the CBN
would provide enough forex for the banks to meet their obligations.
He also said there was no reason to panic over the challenges facing Nigeria and other commodity exporting countries.
Emefiele said, “Nothing bad will happen
in Nigeria. We know the large volumes of obligations that are in the
foreign banks; so, we will try as much as possible to give comfort. The
demand for foreign exchange that I am seeing now is more than the demand
we would normally see; it means something abnormal is happening.
“This is what we are checking at the
forex markets. I want to urge Deutsche Bank, Stanbic IBTC, Citibank,
Standard Chartered and others to renew their credit lines. There is no
cause to worry.
Earlier in the conference, a
representative of Deutsche Bank in Nigeria had complained that banks in
the country were extending their obligations by 30 and 60 days as a
result of delays in getting dollars from the CBN, among other factors.
Reporting the development to the CBN
governor, the Deutsche Bank representative said, “I want to bring
something to your attention, which is credit; and it is tied to a trend
due to your pronouncement in November. In the last three days, I have
had requests from Nigerian banks, which are not meeting their
obligations that have matured, and they are requesting extension of 30
days and 60 days.
“I am not panicking just as you have
asked us not to panic. I have, however, reassured banks all over the
world where Letters of Credit are due to be paid. I believe that they
will pay the refinancing.”
