… urge banks to declare real figures for Q1 2018
Economic and financial analysts have commended the Central Bank of Nigeria for curbing the increasing rate of non-performing loans among banks with the introduction of International Financial Reporting Standards 9.
IFRS 9 rules that all deposit banks must abide by its provisions by disclosing all assets, including loan portfolio, while reporting their financial statements for the first quarter. Aside from the fact that it requires commercial banks to fully disclose their assets, it also mandates them to make provisions (in advance) for non-performing loans.
The Director-General, West African Institute for Financial and Economic Management, Prof. Akpan Ekpo, explained that the policy would encourage transparency and was expected to return sanity to the banking sector.
According to him, most of the banks will be forced to declare their actual profits at the end of the first quarter of 2018.
He said, “We don’t actually know how much profit banks are making but the new policy will expose the actual profit of banks at the end of the first quarter of the year.
“Banks with huge capital base may not feel the impact of the policy, unlike small and mid-size lenders, who might have their capital base being affected negatively.
“It may also affect the aptitude of some banks to meet up with their credit responsibilities to some foreign entities, as Nigerian banks are presently in a struggle with high non-performing loans.”
The Chief Executive Officer, Proximate Consulting Worldwide, Dr. Peter Adebayo, said that the introduction of the new accounting regime for Deposit Money Banks was a fallout of the need to comply with the provisions of the standard.
He said, “With this adoption, assets and loan portfolios, which have not been disclosed prior to now, or have been partially disclosed, will now have to be disclosed in detail and this will no doubt result in provisions that will hit their comprehensive income and impact negatively on their target profitability.
“The advantage of this is that, it will help users of the financial statements to see the reality of the performances of the banks better now; and moving forward, it will enhance the reliance level placed on the financial statements across the globe by users, which is a cardinal objective that the adoption of IFRS is meant to achieve in the first instance.”
