By Modupe Gbadeyanka
The International Monetary Fund (IMF) has thrown its full weight behind the decision of the Central Bank of Nigeria (CBN) to stop banks in the country with capital base and huge bad loans from paying dividends to its shareholders.
The apex bank had last month in a circular directed weak lenders not to pay dividends to its shareholders, though this has generated mixed reactions.
Some aggrieved shareholders had berated the central bank for this directive and has threatened to challenge this decision in court if it is not reversed.
Most of the banks listed on the Nigerian Stock Exchange (NSE) are expected to release their financial statements for the 2017 fiscal year to the public this month.
In its report released yesterday, the IMF supported the CBN decision, saying it was good for the banking sector.
On March 5, 2018, the Executive Board of the IMF concluded its Article IV consultation with Nigeria and at the end of the exercise, the directors of the world lender stressed that rising banking sector risks should be contained.
“They welcomed the central bank’s commitment to help increase capital buffers by stopping dividend payments by weak banks.
“They called for an asset quality review to identify any potential capital need. They noted that an enhanced risk‑based banking supervision, strict enforcement of prudential requirements, and a revamped resolution framework would help contain risks,” a statement issued by the IMF said.
Also, the IMF commended the central bank’s tightening bias in 2017, which it advised should continue until inflation is within the single digit target range.
The IMF directors recommended continued strengthening of the monetary policy framework and its transparency, urging consideration of a higher monetary policy rate, a symmetric application of reserve requirements, and no direct central bank financing of the economy.
A few Directors urged confirmation of the appointments of the central bank’s board of directors and members of the monetary policy committee, the statement said.
