ACIB Past Questions PDF

PAST QUESTIONS
Professional Certification Training

Program (PCTP)
THE CHARTERED INSTITUTE OF BANKERS OF NIGERIA

October, 2017 Examinations
BANK LENDING AND CREDIT ADMINISTRATION
2017/CB/B/02
SECTION A
Question 1
(a) A Company’s Credit Policy should be in a formal document approved by the Board of
Directors. Whether the Policy is expressed formally or informally, there should be basic
factors addressed in the Policy document.
Required:
State five components (factors) of a bank’s Lending Policy. (10 marks)
(b) For all customers, historically and theoretically, bankers are only willing and prepared to
lend if the proposition stands up on its own without the support of security.
Required:
Give five cogent reasons why bankers, on many occasions, insist upon a sufficient margin
of security before granting an advance. (5 marks)
(c) In order to control/minimize credit risks, it is imperative that appropriate standard

process and procedures are developed and implemented.
Required:
Analyse five major ways a bank can adopt to control credit risks. (5 marks)
(Total = 20 marks)
Question 2
(a) The bank, on one hand as a lender, and the borrower on the other hand usually,
negotiate and agree on restrictive covenants as part of the terms and conditions
precedent to the approval of a loan application.
Required:
(i) Briefly explain the two types of loan covenants that are common to most credit
agreements. (6 marks)
(ii) Give three examples each of the restrictions that are related to the two types of
covenants. (6 marks)
(b) Overtrading is essentially a problem of growth in business operations. It happens when

business expands too quickly without having the financial resources to support such a
quick and poorly planned expansion.
Required:
State four important steps that a Lender will advise a borrower to take to avoid risks
of overtrading. (8 marks)
(Total = 20 marks)
2017/CB/B/02
Question 3
(a) As part of the overall loan agreement and documentation, it is conventional for a bank to
state the conditions that a borrower must fulfill prior to draw-down or disbursement of
an approved facility.
Required:
Highlight five (5) of the general conditions precedent that must be satisfied by a borrower
before drawing an approved facility. (10 marks)
(b) In an Estate Development project, the builder’s major problem is that a lot of fund has to
be tied down in work-in-progress before the houses/apartments can be completed and
ready for sale.
Consequently, the source of repayment for the loan will be the income from the sale of
the property. Lending to builders requires the same principles of good lending, but
additionally, however, there are several features of building advances that make them
distinctive and worthy of separate considerations.
Required:
Mention/explain five precautions that a lender should take in order to properly monitor
utilization and ensure control of a facility to a builder. (10 marks)
(Total = 20 marks)
SECTION B
Question 4
AROD TAPEL LIMITED
BALANCE SHEET AS AT 31 DECEMBER
2014 2015 2016
N’000 N’000 N’000
Lease 29,000 29,000 29,000
Fixtures & Fittings 2,800 2,400 2,000
31,800 31,400 31,000
Stock 7,200 5,900 4,900
Debtors 800 600 300
Cash 200 100 100
8,200 6,600 5,300
Bank O/D 1,900 2,100 2,800

Creditors 4,100 3,800 3,600
6,000 5,900 6,400
Net Current Assets 2,200 700 (1,100)

34,000 32,100 29,900
Bank Loan (4,000) ( 3,000) (2,000)
30,000 29,100 27,900
Financed by
Share Capital 30,000 29,100 27,900
2017/CB/B/02
PROFIT AND LOSS ACCOUNT
2014 2015 2016

N’000 N’000 N’000
Sales - 49,000 52,000
Purchases - 45,000 48,000
Net Profits - 3,100 2,800
Drawings - 4,000 4,000
Depreciation - 400 400
Mr. Arod Tapel is a retired director of Port Authority who has banked with you for 20 years.
He received a lump sum of N30m on his retirement, which he used to purchase a general
store which has living accommodation on the first floor in a small town.
He paid N34m for the store/business premises with the help of a loan of N4m from your
bank, payable over 4 years. You have also agreed to an overdraft facility of N3m, to cover
seasonal stock purchases. Your security is a mortgage over the property and an assignment
of a life policy with surrender value of N2m. Mr. Tapel plans to buy a rival store that has
been competing with him, which has affected his business in the past two years. He tells
you that he has opportunity to buy it at N17m; and he has decided to transfer all the stocks
to his own store and turn it into a drinking bar/restaurant because it is close to a major bus
stop and railway station.
The customer has requested for a four (4) year loan of N10m to help him to purchase the
competitive business, and he offers a mortgage over its lease with (10 years to run) in
addition to existing security.
The business he would like to purchase apparently had sales turnover of N50m in its recent
year, purchases of N40m and drawings of N8m.
Required:
(a) Comment on the state of his current business based on the information provided.
(6 marks)
(b) In general, would you be willing to recommend acceptance of Mr. Tapel’s proposition?
Explain your views. (14 marks)
(Total = 20 marks)
Question 5
HERBAL PRODUCT LTD, a manufacturer of herbal mixtures has maintained account with your
bank for over 5 years.
The Company’s factory is located in Lagos, the commercial capital of the country with many
sales outlets in major cities in the South Western States. In anticipation of boosting the
business sales turnover, the company’s management, after a rigorous marketing survey,
decided to expand their sales outlets by opening shops in other selected cities in the country.
After the Company’s Annual General Meeting last month, the Directors agreed to apply for
an overdraft facility of N15.05 million to pay for rents and other incidental expenses for the
proposed outlets. The audited accounts of the Company for the last two years are shown
below:
2017/CB/B/02
HERBAL PRODUCT LTD

BALANCE SHEET AS AT 31ST DECEMBER
YEAR 1 YEAR 2
N’000 N’000 N’000 N’000

Asset Employed
Fixed Assets 77,000 66,000
Current Assets
Stocks 23,000 27,000
Debtor 21,000 13,000
Bank & Cash 20,000 30,000
64,000 70,000
Current Liabilities
Creditors (70,000) (57,000)
(6,000) 13,000
71,000 79,000
Funds Employed
Capital 20,500 20,500
Share Premium 6,500 6,500
General Reserves 40,000 47,000
Long-Term Liabilities
Debenture 4,000 5,000
71,000 79,000
PROFIT AND LOSS

YR1 YR2
N’000 N’000
Turnover 211,000 154,000
Cost of Sales (176,000) (106,000)
Gross Profit 35,000 48,000
Net Operating Expenses ( 17,000) ( 29,000)
Interest Payable (500) (600)
Profit Before Taxation 17,500 18,400
Taxation (6,200) (6,400)
Net Profit 11,300 12,000
Required:
Prepare a good analysis of the financial position of the company with a view to making a
decision on the request.
(20 marks)
2017/CB/B/02
Question 6
(a) Credit Scoring and Credit Ratings are tools used by lending banks and other financial
institutions for evaluation and appraisal of credit/loan applications.
Required:
Briefly explain the basic elements of the two methods of measuring a borrower’s financial
capability and their importance during credit appraisal process. (8 marks)
Debtors are current assets of a business and they have to be financed. Most companies are
able to finance their debtors with a mix of long term funds and current liabilities as indicated
in any balance sheet. Sometimes companies might have difficulties in financing their debtors
when there is no bank support available to them.
Required:
(i) Mention four (4) occasions when factoring can be suggested to a bank customer.
(4 marks)
(ii) Outline the advantages of factoring finance to a client (8
marks)
(Total = 20 marks)
SECTION C
Question 7
Analysing balance sheet and other accounting statements provides information about the
strength or financial vulnerability of a business. If they are reasonably up-to-date, they might
help a banker to identify warning signs that the customer’s business is getting into trouble.
Required:
(a) Identify signs of financial trouble that financial accounts (or management accounts) would
show when a business falls into a financial crisis. (14 marks)
(b) What are the other non-financial factors that might make Small and Medium Enterprises
(SME) business vulnerable to sudden collapse without any financial limitations?
(6 marks)
(Total = 20 marks)
Question 8
An important function of credit management is credit control. This is primarily a process of

deciding how much credit should be given to borrowers and ensuring compliance with the
credit terms that are set.
Required:
(a) What are the consequences of poor credit control? (6 marks)
(b) Credit control is a continual process, list six critical elements of an effective credit control
process/guidelines (14 marks)
(Total = 20 marks)
ONLY approved examination documents and writing materials i.e. ball point pen, pencil, ruler etc.
may be brought in.
SECTION A
Question 1
(a) Mr. James Adefola is a newly employed staff and recently deployed to your unit for
branch orientation as part of his training programme. While he was reviewing
documents in a customer’s file, he asked you to explain the use of ‘Memorandum and
Articles of Association’ in credit appraisal.
What would be your response? (5 marks)
(b) As a result of the volatile economic situation which has affected individuals and
business organizations, generally, security consideration for bank lending has come to
the fore.
(i) What do you understand to be the purposes of Security, generally and Security
Margin in lending? (10 marks)
(ii) Why is security considered essentially as a factor for fallback position in
lending? (5 marks)
(Total = 20 marks)
Question 2
Bankole Limited has banked with BOD Bank Plc for about 18 years. The company wishes
your bank to take over as its bankers.
Mr. Barnes, the Managing Director/Chief Executive Officer has asked for a N30 million
overdraft for trading. The facility is to be secured with the company’s property, valued at
N20 million and his own property valued N25 million.
Required:
What information do you require for a comprehensive and objective review of this request?
(20 marks)
Question 3
Banks and other financial institutions are required by regulatory authorities to adopt good
lending principles in conjunction with other risk policies, processes and procedures in order
to ensure commitment to responsible lending practices.
Required:
(a) Enumerate lending principles that a bank should adopt to ensure safe and sound
bank credit portfolio. (10 marks)
(b) What are the crucial and ethical issues that must be considered in order to ensure that
marketing of credit/loan products is done in line with best banking practices?
(10 marks)
(Total = 20 marks)
SECTION B
Question 4
Songodara Enterprises Limited is a brick making business in Ijebu-ode owned and managed
by sole proprietor, Mr. Songodara. The enterprise has had account with your branch for
about six (6) years. He has borrowed money from your bank using overdraft facility and has
repaid as at when due. He wants to expand his brick factory and estimated he will need N20
million. Out of this, his total financial requirements, he indicated he has resources in cash
and materials to raise N15,000,000 and he has requested your financial support to raise the
balance of N5.0million. He presents your branch with the 2013 financial statements as set
out below.
Songodara Enterprises Limited

Balance Sheet as at 31st December, 2013
N N
Capital Goodwill 140,000
Ordinary Shares 160,000 Fixed Assets 550,000
Reserves 280,000 Stocks 420,000
Preference Shares 280,000 Debtors 360,000
Debentures 340,000 Cash 90,000
Accrued Taxation 100,000
Bills Payable 180,000
Creditors 220,000
1,560,000 1,560,000
Profit and Loss Account for the Year Ended 31st December, 2013
N N
Sales: Credit 1,100,000

Cash 400,000
1,500,000
Less Expenses:
Cost of goods sold 950,000
Selling and Admin. Expenses 130,000
Interest on Debentures 40,000
1,120,000
Profit Before Tax 40,000
Tax (5,000)
Profit After Tax 35,000
Debenture Interest 3,000
Profit After Tax 32,000
Preference Dividend 8,000
24,000
Ordinary Shares Dividend 5,000
Undistributed Profit 19,000
Required:
Using relevant financial ratios, appraise and assess this request. (20 marks)
Question 5
A major problem facing a growing company is the difficulty in raising overdraft finance from
its bank to fund further growth. Once a bank has lent up to what it considers prudent, the
branch manager is usually unable to go any further, even if the businessman has firm orders
he needs to finance.
(a) Under which circumstances would a branch manager suggest the possible advantages
of using a factoring to his business customers? (5 marks)
(b) Identify those problems a company would be hoping to overcome by employing a

factoring service. (5 marks)
(c) List five benefits of factoring for a business customer. (10 marks)
(Total =20 marks)
2015/CB/A/02
Question 6
Unique Builders and Construction Company Plc is a multibillion naira civil engineering outfit
with solid reputation for building dams, bridges, housing estates, airports and other big
projects.
They are preferred bidders for a US$5 billion 2nd Lagos Free Trade Zone at Badagry. They
enjoy overdraft, loans, bonds and guarantees with local banks and US$400 million credit line
with the parent company in Germany.
They have approached your bank to raise US$2 billion locally as the lead-bank of a consortium
of banks.
Required:
(a) What is your explanation of consortium/syndication lending? (3 marks)

(b) What are the roles of the lead bank? (7 marks)
(c) List out necessary documentation for a syndicated loan and the information you would
require to appraise the proposal. (10 marks)
(Total =20 marks)
SECTION C
Question 7
You have just resumed as the Manager of a busy branch located in one of the big markets
in Lagos. Head Office has mandated you to specifically improve the poor quality of lending
portfolio as reflected in the CBN examiners’ report during their last examination of the branch.
Required:
List and briefly explain the information and data you will require to facilitate the review of
the credit portfolio of the branch. (20 marks)
2015/CB/A/02
Question 8
(a) In addition to analysis of the periodical reports and financial statements received from
borrowing customers, pre and post disbursement visits to customers’ premises are
essential for effective monitoring and control of credit facilities.
Required:
What are the critical control/monitoring issues that a banker should verify during a
visit to the business premises of a customer? (14 marks)
(b) Bad debt recovery could be undertaken in any of the following ways:
(i) Realisation of the security
(ii) Appointment of a debt collector
(iii) Institution of legal action
Briefly discuss.
(6 marks)
(Total = 20 marks)
2017/CB/A/02
SECTION A
Question 1
(a) Each lending proposal has to be treated on its merits, though there are general principles
which may be applicable in all cases. There will always be some risks that the customer will be
unable to repay, and it is in assessing these risks that the lender needs to demonstrate both
skill and judgment.
What are the critical factors a lending banker must bear in mind when analyzing a proposal
from a business customer that has recently transferred his account from a competitor? (16
marks)
(b) Loan proposals for certain purposes would normally be turned down even where they met
other required lending considerations.
Required:
State and explain two instances when a credit request would be turned down because of the
purpose of the proposal. (4 marks)
(Total = 20 marks)
Question 2
(a) In order to check the likely ability of the borrower to repay a credit facility, the banker must
look for evidence that the source of repayment is likely to be sufficient, and the source of
repayment must be clear from the outset.
Required:
State and explain purposes of five financial ratios from the borrower’s financial statements that
a credit officer may require for assessment of a customer’s ability to repay. (10 marks)
(b) A bank lending policy manual provides a banker with useful rules, procedures and
guidelines that make lending process consistent and practical.
Required:
Briefly explain the stages involved in processing a lending proposition from a borrowing
customer. (10 marks)
(Total = 20 marks) 3
2017/CB/A/02
Question 3
(a) The internal business environment provides factors within the organisation that impact the
approach to and success of lending operations.
Required:
Identify and explain five (5) internal factors that limit the size of a bank’s loan portfolio. (10
marks)
(b) Ideally, the cannons of leading should be satisfied irrespective of available security, but
security is often considered necessary in case the payment proposals fail to materialize.
Mention five (5) essential features of a good security for bank credit. (10 marks)
(Total = 20 marks)
SECTION B
Question 4
(a) The ultimate goal of a credit investigation is to help a bank in ensuring loan repayment and
to minimize losses.
(i) What do you understand by the term Credit Investigation? (3 marks)
(ii) State five (5) means of information verification during credit investigation
process. (5 marks)
(iii) State four (4) important information a credit officer would require from a credit reference
agent. (4 marks)
(b) Discuss the elements of credit risk management procedures. (8 marks)

(Total = 20 marks)
Question 5
Marvelus Products Ltd, a manufacturing company has had a banking relationship with your
bank for over 10 years. The company directors approached you to assist in the purchase of
land adjoining their factory on which to build additional storage accommodation. They intend to
increase their turnover and will need the additional room to carry heavier stocks of raw material
and finished products.
The cost of the land and building will amount to N35 million, out of which the directors will
provide N10 million by subscription of additional cash capital, and you are asked to lend the
balance of N25 million. The directors also told you that sales and purchases
during the year ended 31st December, 2015 amounted to N220 million and N150 million
respectively. 4
2017/CB/A/02
Detail of the account submitted is set out below;
MARVELUS PRODUCTS LTD
N’000 N’000 N’000
FIXED ASSETS
Land and Buildings 40,000
Plant and Machinery 15,000
Motors etc 4,000
59,000
CURRENT ASSET
Stocks:
Raw materials 8,000
Finished Goods 12,000
Debtors 35,000
Cash at Bank 9,000
64,000
CURRENT LIABILITIES
Creditors 24,000
Tax 5,000
Dividend 3,000
(32,000) 32,000
91,000
CAPITAL
Authorized Shares (N50m) 40,000
Reserves 15,000
Profit and Loss A/C 6,000
LONG TERM LIABILITIES
Debenture 30,000
91,000
Required:
(a) What are the major points you will consider in appraising this request?
(15 marks)
(b) State with reasons, any other information/documents you would request from the
customer. (5 marks)
(Total = 20 marks)
Question 6
ALIMAX MERCHANTILE CO LTD., imports and markets wears. The company has established an
account relationship with your branch for over 8 years and did not have any commitment until
last year when it was granted an overdraft of N40 million which was included in the figures for
current liabilities in the balance sheet. 5
2017/CB/A/02
The audited accounts of the company for the past three years are stated below:
ALIMAX MERCHANTILE CO. LTD
Balance Sheet as at 31st December
2013 2014 2015
N’000 N’000 N’000
ASSET EMPLOYED
Fixed Assets 83,000 78,800 87,000
Current Assets 230,000 271,200 314,800
Current Liabilities (46,000) (52,000) (105,000)
Long/term Liabilities (unsecured) (17,000) (23,000) (27,000)
Short term Liabilities (25,000) (35,000) (24,800) 225,000 240,000 245,000
FUNDS EMPLOYED
Share Capital 102,000 102,000 102,000
Revaluation Reserve 13,000 13,000 13,000
General Reserve 57,000 72,000 77,000
Debenture 53,000 53,000 53,000
225,000 240,000 245,000
Turnover 266,200 316,000 368,600
Gross Profit 32,200 42,100 50,000
Net Profit 22,680 29,220 30,140
Dividend per Share N1.2 N1.50 N2.00
NB
Your bank is interested in using the financials for the purpose of monitoring the facility.
Required:
(a) As a credit analyst, you are to analyze and comment on the following items:
(i) Working Capital
(ii) Debenture
(iii) Gross Profit Margin
(iv) Net Profit Margin
(v) Turnover
(15 marks)
(b) Mention two (2) uses and three (3) limitations of financial ratios to a lending banker. (5
marks)
2017/CB/A/02
SECTION C
Question 7
The loan provisioning guidelines which form part of the Central Bank Prudential guidelines
provide guidance to all banks on recognition and establishment of loan loss provision.
(a) Explain what you understand by loan loss provision in line with prudential guidelines. (2
marks)
(b) Briefly analyse the provision requirements for the following non-performing project
financing debts:
(i) Watch list

(ii) Substandard
(iii) Doubtful
(iv) Very doubtful
(v) Lost (10 marks)
(c) What are the Prudential Guidelines on policies and procedures for write-off of fully provided
lost credit facilities? (8 marks)
(Total = 20 marks)
Question 8
(a) When a borrower is having problems in meeting up with the loan repayment program as
originally envisaged, the customer may request for a loan work out.
What is a loan workout agreement and what are the benefits to both the borrower and lender.
(5 marks)
(b) It is worthy of note that one of the major factors for the failure of banks in Nigeria in recent
time was as a result of the continual deterioration of the quality of credit portfolio of the banks.
Required:
Identify ten (10) internal weaknesses that could lead to poor credit portfolio in a bank. (10
marks)
(c) State the importance and functions of a bank credit committee. (5 marks)
(Total = 20 marks)
2017/CB/A/02
SECTION A
Question 1
(a) Each lending proposal has to be treated on its merits, though there are general principles
which may be applicable in all cases. There will always be some risks that the customer will be
unable to repay, and it is in assessing these risks that the lender needs to demonstrate both
skill and judgment.
What are the critical factors a lending banker must bear in mind when analyzing a proposal
from a business customer that has recently transferred his account from a competitor? (16
marks)
(b) Loan proposals for certain purposes would normally be turned down even where they met
other required lending considerations.
Required:
State and explain two instances when a credit request would be turned down because of the
purpose of the proposal. (4 marks)
(Total = 20 marks)
Question 2
(a) In order to check the likely ability of the borrower to repay a credit facility, the banker must
look for evidence that the source of repayment is likely to be sufficient, and the source of
repayment must be clear from the outset.
Required:
State and explain purposes of five financial ratios from the borrower’s financial statements that
a credit officer may require for assessment of a customer’s ability to repay. (10 marks)
(b) A bank lending policy manual provides a banker with useful rules, procedures and
guidelines that make lending process consistent and practical.
Required:
Briefly explain the stages involved in processing a lending proposition from a borrowing
customer. (10 marks)
2017/CB/A/02
Question 3
(a) The internal business environment provides factors within the organisation that impact the
approach to and success of lending operations.
Required:
Identify and explain five (5) internal factors that limit the size of a bank’s loan portfolio. (10
marks)
(b) Ideally, the cannons of leading should be satisfied irrespective of available security, but
security is often considered necessary in case the payment proposals fail to materialize.
Mention five (5) essential features of a good security for bank credit. (10 marks)
(Total = 20 marks)
SECTION B
Question 4
(a) The ultimate goal of a credit investigation is to help a bank in ensuring loan repayment and
to minimize losses.
(i) What do you understand by the term Credit Investigation? (3 marks)
(ii) State five (5) means of information verification during credit investigation
process. (5 marks)
(iii) State four (4) important information a credit officer would require from a credit reference
agent. (4 marks)
(b) Discuss the elements of credit risk management procedures. (8 marks)

(Total = 20 marks)
Question 5
Marvelus Products Ltd, a manufacturing company has had a banking relationship with your
bank for over 10 years. The company directors approached you to assist in the purchase of
land adjoining their factory on which to build additional storage accommodation. They intend to
increase their turnover and will need the additional room to carry heavier stocks of raw material
and finished products.
The cost of the land and building will amount to N35 million, out of which the directors will
provide N10 million by subscription of additional cash capital, and you are asked to lend the
balance of N25 million. The directors also told you that sales and purchases
during the year ended 31st December, 2015 amounted to N220 million and N150 million
respectively. 4
2017/CB/A/02
Detail of the account submitted is set out below;
MARVELUS PRODUCTS LTD
N’000 N’000 N’000
FIXED ASSETS
Land and Buildings 40,000
Motors etc 4,000
59,000
CURRENT ASSET
Stocks:
Raw materials 8,000
Finished Goods 12,000
Debtors 35,000
Cash at Bank 9,000
64,000
CURRENT LIABILITIES
Creditors 24,000
Tax 5,000
Dividend 3,000
(32,000) 32,000
91,000
CAPITAL
Authorized Shares (N50m) 40,000
Reserves 15,000
Profit and Loss A/C 6,000
LONG TERM LIABILITIES
Debenture 30,000
91,000
Required:
(a) What are the major points you will consider in appraising this request?
(15 marks)
(b) State with reasons, any other information/documents you would request from the
customer. (5 marks)
(Total = 20 marks)
Question 6
ALIMAX MERCHANTILE CO LTD., imports and markets wears. The company has established an
account relationship with your branch for over 8 years and did not have any commitment until
last year when it was granted an overdraft of N40 million which was included in the figures for
current liabilities in the balance sheet. 5
2017/CB/A/02
The audited accounts of the company for the past three years are stated below:
ALIMAX MERCHANTILE CO. LTD
Balance Sheet as at 31st December
2013 2014 2015
N’000 N’000 N’000
ASSET EMPLOYED
Fixed Assets 83,000 78,800 87,000
Current Assets 230,000 271,200 314,800
Current Liabilities (46,000) (52,000) (105,000)
Long/term Liabilities (unsecured) (17,000) (23,000) (27,000)
Short term Liabilities (25,000) (35,000) (24,800) 225,000 240,000 245,000
FUNDS EMPLOYED
Share Capital 102,000 102,000 102,000
Revaluation Reserve 13,000 13,000 13,000
General Reserve 57,000 72,000 77,000
Debenture 53,000 53,000 53,000
225,000 240,000 245,000
Turnover 266,200 316,000 368,600
Gross Profit 32,200 42,100 50,000
Net Profit 22,680 29,220 30,140
Dividend per Share N1.2 N1.50 N2.00
NB
Your bank is interested in using the financials for the purpose of monitoring the facility.
Required:
(a) As a credit analyst, you are to analyze and comment on the following items:
(i) Working Capital
(ii) Debenture
(iii) Gross Profit Margin
(iv) Net Profit Margin
(v) Turnover
(15 marks)
(b) Mention two (2) uses and three (3) limitations of financial ratios to a lending banker. (5
marks)
2017/CB/A/02
SECTION C
Question 7
The loan provisioning guidelines which form part of the Central Bank Prudential guidelines
provide guidance to all banks on recognition and establishment of loan loss provision.
(a) Explain what you understand by loan loss provision in line with prudential guidelines. (2
marks)
(b) Briefly analyse the provision requirements for the following non-performing project
financing debts:
(i) Watch list

(ii) Substandard
(iii) Doubtful
(iv) Very doubtful
(v) Lost (10 marks)
(c) What are the Prudential Guidelines on policies and procedures for write-off of fully provided
lost credit facilities? (8 marks)
(Total = 20 marks)
Question 8
(a) When a borrower is having problems in meeting up with the loan repayment program as
originally envisaged, the customer may request for a loan work out.
What is a loan workout agreement and what are the benefits to both the borrower and lender.
(5 marks)
(b) It is worthy of note that one of the major factors for the failure of banks in Nigeria in recent
time was as a result of the continual deterioration of the quality of credit portfolio of the banks.
Required:
Identify ten (10) internal weaknesses that could lead to poor credit portfolio in a bank. (10
marks)
(c) State the importance and functions of a bank credit committee. (5 marks)
(Total = 20 marks)
2016/CB/B/02
SECTION A
Question 1
Lending policy, if properly articulated, should provide a guide for safe, sound and profitable
activity to banks.
Required:
(a) What are the three (3) main sections of lending policy? (6 marks)
(b) Briefly explain three (3) major steps a bank must take in implementing its lending policy. (6
marks)
(c) State four (4) advantages of lending policy to banks. (8 marks)
(Total = 20 marks)
Question 2
(a) A good credit culture must exist in the heart and minds of the people involved, rather than
through tangible evidence such as manuals, memos and systems.
Required:
Identify five (5) acceptable behaviours and attitude that bank’s staff should exhibit to ensure a
strong credit culture. (10 marks)
(b) Owing to the prevailing economic difficulty in the country, your customer, Self-Reliance
Enterprises considers it necessary to borrow. Chief James Ojuolape, the Chief Executive Officer
of the enterprise calls this morning for a credit facility.
As the Credit Officer who has the responsibility of interviewing prospective borrowers, what
points must you consider in assessing his proposal? (10 marks)
Question 3
(a) Discuss, in outline, the credit management process. (12 marks)
(b) Customers of banks find it difficult in the recent past to repay the credit facilities
granted to them as promised because banks did not appropriately market the credit/loan
products in line with best practices.
Identify eight relevant factors in marketing of credit/loan products. (8 marks)
(Total = 20marks) 3
2016/CB/B/02
SECTION B
Question 4
Dr. Bath Oloye, one of three directors in Rainbow Ltd, a firm of civil engineers, calls into your
branch to tell you he is getting divorced and requests you to increase his mortgage (which is
already with your bank) so that he can “pay off” his wife. Your records on Dr. and Mrs. Oloye
reveal the following position:
N’000
- Salary of Dr. Oloye 15,000
- Value of Property 55,000 (owned jointly)
- Mortgage Outstanding 36,000
Dr. Oloye tells you that:

(a) It has been agreed he will pay N16million to his wife when the divorce is finalised.
(b) He wishes to replace several window frames and other fittings at a cost of N8million.
(c) The value of his property is now N75million.
(d) His income is now N20million and as evidence of this, he hands you an extract of his firm’s
up to date profit and loss account, together with a letter from the accountants for the firm.
(e) There are no children of the marriage.
(f) He wishes to increase the mortgage to N60million.
Required:
Set out, in detail, your response to the request in (f) above. State all conditions that must be
met by the customers if facility is to be granted. (See Profit & Loss account below) 4
2016/CB/B/02
Extract from Rainbow Ltd Profit & Loss Accounts
31/03/2013 31/03/2014
N’000 N’000 N’000 N’000
Sales and Work Done 235,000 384,000
Cost of Sales (110,000) (201,000)
Gross Profit 125,000 183,000
Selling/Distribution Cost 29,000 51,000
Other Expenses 12,000 23,000
Admin Expenses 37,000 45,000
Depreciation 2,000 80,000 3,000 122,000
Directors Remuneration 38,000 44,000
Pension Contribution - 38,000 10,000 54,000
Net Profit 7,000 7,000
(20 marks)
Question 5
(a) Grey Plc. and Kend Plc trade in the same industry but in different geographical locations.
The following data are taken from their 2013 annual accounts.
Grey Plc Kend Plc
N’000 N’000
Turnover 40,000 60,000
Total Operating Expenses 36,000 55,000
Average Total Assets (2013) 30.000 25,000
Required:
(i) Calculate the rate of return on total assets (profit as a percentage of total assets) for each
company.
(ii) Analyse the net profit percentage and ratio of turnover to total assets.
(iii) Comment on the relative performances of the two companies in so far as the information
permits. 5
2016/CB/B/02
(iv) Indicate what additional clarification you would need to decide which company is the better
proposition from the viewpoint of potential borrower.
NB: Ignore taxation. (12 marks)
(b) Give brief explanation of the following Prudential Guidelines provisions:
(i) Single Obligor limits
(ii) Concentration credit limit (8 marks)
(Total = 20 marks)
Question 6
(a) The Central Bank of Nigeria (CBN) has in its guidelines for the Licensing,
Operations and Regulation of Credit Bureau and Credit Bureau Related Transactions in Nigeria
issued in 2013, provided for the establishment of private Credit Bureau.
Required:
(i) Explain what a Credit Bureau is and mention three (3) benefits of the organization to a
lending banker. (5 marks)
(ii) Distinguish between a Credit Bureau and a Credit Registry. (10 marks)
(b) What are the objectives of a lender when pricing a loan? (5 marks)
(Total = 20 marks)
SECTION C
Question 7
(a) Credit card fraud is commonly perpetrated through identity theft in many
countries including Nigeria.
Required:
(i) What is identity theft? (2 marks)
(ii) List and briefly explain two (2) major classifications of identity theft.
(6 marks) 6
2016/CB/B/02
(b) Briefly explain the following concepts and discuss how each is related to credit
card fraud:
(i) Debit/credit card skimming
(ii) Debit/credit card checker
(iii) Debit/credit card phishing (12 marks)
(Total = 20 marks)
Question 8
(a) You are a member of your bank loan committee and in a recent meeting of the
committee, another member of the committee observed that some of the credit Officers are not
taking the issue of loan review seriously. He opined that this has resulted in the increasing
state of non-performing loan in the bank’s loan portfolio.
What are the important issues to be covered in a loan review? (10 marks)
(b) Causes of problem loans are human, financial management and macro-economic. Identify
both interim and final remedial actions that bank should take to protect the bank’s interest. (10
marks)
(Total = 20 marks)
2015/CB/B/02
SECTION A
Question 1
Mr. Shola Ajaga, has been in account with your bank for many years. For the first time, he
called with a loan proposal worth N20million to execute a contract awarded to his company,
NEW ERA VENTURE, by the Federal Ministry of Works, Abuja, Nigeria.
The Head Office had shown interest based on your earlier telephone conversation but asked
that the Branch intimate it with all matters to consider the request.
Required:
State the elements of the general principles of good lending that would guide you in your
appraisal of the request. (20 marks)
Question 2
Marketing should begin with potential customers needs, not with the production process.
(i) Explain what you understand by Credit Marketing. (5 marks)
(ii) Identify the imperatives for a successful Credit Marketing. (6 marks)
(iii) Profer practical guide to effective Credit Marketing. (9 marks)
(Total = 20 marks)
Question 3
One of the major elements of credit management in a bank is establishing a written loan policy
which gives loan officers and the bank’s management specific guidelines in making individual
loan decisions.
Required:
List and explain some of the elements of a good bank loan policy. (20 marks) 3
2015/CB/B/02
SECTION B
Question 4
PRISM LTD manufactures wooden furniture and sheds. It maintains a well conducted account
with overdraft facilities of N40million, which are used mainly to cover purchases of timber when
supplies become available in the dry season.
Last month, the company was offered a contract by a well known store, which resulted in a
50% increase in sales. To produce the additional goods, it will need to build an extension at the
back of the existing factory. The land is owned by the company.
The directors ask for a loan of N60million in addition to the of N40million overdraft facility, to
cover the extension. Details of the account submitted are set below:
Required:
What considerations would you have in mind in dealing with this request, and what action
would you take? (20 marks)
PRISM LTD
Balance Sheet as at 30th September, 2013
N’000 N’000
FIXED ASSET
Land and Building 80,000
Motor Vehicle 10,000
Fixture and Fittings 2,400
114,400
CURRENT ASSET
Advance Corporate RefundTax Receivable 5,000
Cash at Bank 9,200
Debtors 51,600
Stocks 28,400
94,200
LESS CURRENT LIABILITIES
Creditors 33,400
Tax Due 12,600 4
2015/CB/B/02
Dividend 10,000
Advance Corporate 5,000 33,200
147,600
ISSUED SHARE
Capital 80,000
Reserves 50,000
Profit and Loss 17,600
147,600
Turnover 310,000
Net Profit 33,400
After: Depreciation 10,700
Directors Remuneration 15,000
Tax 12,600
Question 5
Chief Tony Adex and his wife are directors of a private limited company operating a bakery and
confectionary shop, which they purchased some five years ago at an overall cost of N9million,
towards which they contributed N5million. Your branch granted a mortgage of N4million over
the leasehold shop premises, which include a flat for their own occupation, and against their
personal joint and several guarantee. The borrowing has been reduced steadily as arranged at
the rate of N800,000 per annum. They now have the opportunity to purchase additional, very
similar, business in a neighbouring town about two kilometers away. They seek your help in
providing N4million towards the purchase price of N9million inclusive of stocks, fixtures etc.
They assure you that they can clear this borrowing at the rate of N1million per annum over
four years.
Extract from the accounts of their existing business are set out below. 5
2015/CB/B/02
CHIEF TONY ALEX
Balance Sheet as at 31st Oct. 2012 Oct. 2013
October, 2012 Oct. 2011
Fixed N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000 N’000
Asset
Lease & Goodwill at 6,530 6,530 6,530
cost
Fixtures & Fittings at 677 721 681
cost
7,207 7,251 7,211
Current Assets
Stock 2,025 1,690 1,528
Debtors 423 312 388
Cash 331 2,779 10 2,012 140 2,062
Current Liabilities
Creditors 1,582 1,598 1,902
Bank Overdraft - 34 -
Taxation 310 180 175
Bank Loan 2,400 4,292 1,600 3,412 800 2,877
Liquid Deficiency (1,513) (1,400) (815)
5,694 5,851 6,396
Less Loan by Directors 5,405 5,505 6,025
289 346 371
CAPITAL 100 100 100
Profit & Loss 189 246 271
289 346 371
Purchases 21,185 20,046 23,896
Sales 24,515 24,021 28,336
Profit (Before Directors 719 675 1,252
Fees, depreciation
and taxation)
Directors Fee 402 402 1002
2016/CB/A/02
SECTION A
Question1
In formulating lending policies, various factors are usually considered.
(a) Discuss five (5) basic/underlining factors that banks usually consider when formulating bank
lending policy. (10 marks)
(b) List five (5) specific factors that should be included in a bank lending policy. (10 marks)
(Total = 20 marks)
Question 2
(a) In their lending operations, banks must prudently focus on liquidity, profitability, costs and
convenience. Discuss. (10 marks)
(b) Credit standards derive from credit culture. Discuss. (10 marks)
(Total = 20 marks)
Question 3
The (i) technological
(ii) economic
(iii) political
(iv) regulatory, and
(v) institutional environments of banks impact decisively on their lending operations.
Discuss succinctly but comprehensively. (4 marks each)

2016/CB/A/02
SECTION B
Question 4
Engineer Sunday Okoye, the Chief Executive Officer (CEO) of Westend Metal Works Limited,
paid you a visit to discuss the possibility of transfer to your bank of his company’s account
presently with a competitor.
In the course of discussion, he produced the company’s audited accounts for the past two
years to 31st May, 2015 which are reproduced below. In addition, Engineer Okoye informed you
that the company is in the business of carpets and tiles and operates from two separate
locations in Nigeria. At the moment, there is an overdraft limit of N2 million for the day-to-day
working capital facilities and this is supported by a debenture over the company’s assets.
Required:
(a) An assessment of the company’s credit worthiness using Balance Sheet and Profit and Loss
Account ratios and trends. (15 marks)
(b) Comment on any other relevant issues including any point on which you will be seeking
further information. (5 marks)
(Total = 20 marks)
WESTEND METAL WORKS LIMITED
Balance Sheet as at 31st May.
2014 2015
N’000 N’000
FIXED ASSETS
Land and Building (including Lease) 74,400 74,400
Shop Improvement 28,000 23,000
Fixtures/Fittings 22,800 29,000
Motor Vehicles 3,400 4,400
128,600 130,800 4
2016/CB/A/02
CURRENT ASSETS
Debtors 42,000 40,000
Stocks 92,000 156,000 134,000 196,000
Less Current Liabilities
Creditors 115,800 157,000
Bank 39,000 63,000
Directors’ Loan 2,000 2,000
156,800 (22,800) 222,000 (26,000)
105,800 104,800
FINANCED BY
Share Capital 1,000 1,000
Capital Reserve 65,000 65,000
Profit and Loss Account 39,800 38,800
105,800 104,800
2014 2015
Sales 556,000 640,000
Purchases 343,000 446,000
Gross Profit 243,000 261,000
Question 5
(a) Dr. Peter Johnson, a medical lecturer with a private University, is your customer and wishes
to purchase a freehold house with registered title for N9.5 million and settlement is due on
June 13.
He presently owns his house where he is living with his family, and there is an outstanding
mortgage loan of N3 million on it. This house has been sold by him for N8 million, but
settlement is due on June 30, when the buyer would have secured a mortgage loan.
Dr. Johnson asks you to bridge the period between the purchase and sale, assuring you that he
will raise another mortgage loan from Atlantic Mortgage Bank to cover the borrowing
outstanding after completion of the two transactions. 5
2016/CB/A/02
Required:
Describe how you would handle the request and how you would safeguard the bank’s position
throughout. (12 marks)
(b) Listed companies usually come out with their annual reports highlighting their position and
performance to investors and other stakeholders. State four (4) important information in the
report that are relevant for credit appraisal.
(8 marks)
(Total = 20 marks)
Question 6
(a) Your long standing customer, Chief Mowowa Jacob who is the Managing Director of MOJAS
Nigeria Limited calls to tell you that he has been advised by the company’s Finance Director
that since the company is earning only modest profits, they should require an equipment
leasing facility to finance the company’s equipment.
Required:
(i) Explain to Chief Mowowa Jacob the meaning of equipment leasing and types, and why it is
recommended for the company. (10 marks)
(ii) State four (4) characteristics of a Lease Finance. (4 marks)
(b) State four (4) reasons why banks engage in Loan Syndication. (6 marks)
(Total = 20 marks)
SECTION C
Question 7
All licensed banks are required to review their credit portfolios continuously with a view to
recognizing any deterioration in credit quality. Based on the perceived risks of defaults, credit
facilities and other loss contingencies connected with a bank’s credit risks are, therefore,
expected to be classified as either “performing” or “non-performing”.
Required:
(i) Define “performing and non-performing” credits in line with provision of the Central Bank of
Nigeria Prudential Guidelines, 1990. (6 marks) 6
2016/CB/A/02
(ii) Explain, in details, the criteria (both objective and subjective) used to identify and classify
all classes of non-performing credits, i.e. Substandard, Doubtful and Lost (12 marks)
(iii) Under what conditions can a credit facility already classified as “non-performing” be re-
classified as “performing”? (2 marks)
(Total = 20 marks)
Question 8
(a) Where the lender agrees with the customer for a longer period to pay the loan, the bank
will reschedule the debt.
What are the steps to be taken by a lender when rescheduling a debt? (10 marks)
(b) When a bank has tried all remedial actions to reverse the fortunes of a project related loan
fails, what actions should it take to salvage what it can from the borrower? (10 marks)
(Total = 20 marks)
2014/CB/A/02
SECTION A
Question1
Banks that were taken over by the Central Bank of Nigeria (CBN) in 2009 Banking Sector
Reform were alleged to have weak credit culture and widespread breaches of their Credit
Policies by the executive management.
Required:
a) What is credit culture? State and explain four (4) major types of credit culture.
(10 Marks)
b) What is credit standard in relation to credit culture. (10 Marks)
(Total 20 Marks)
Question 2
Discuss the various points/issues that must be examined and agreed with the borrowing
customer by the bank before lending decision is reached. (20 Marks)
Question 3
a) You are the credit officer of your bank and were invited to the symposium of the Banking
and Finance Students Association of the Success University to talk on ‘‘the general principles of
good lending’’ also known as cannons of good lending. You are required to state and explain
five (5) general or cannons of good bank lending. (15 Marks)
b) Explain how bankers reconcile the banking concepts of liquidity and profitability.
(5 Marks)
(Total 20 marks)
2014/CB/A/02
SECTION B
Question 4
Yesterday you met the Chief Executive Officer (CEO) of Victor Supplies Ltd. at the Club
House. He informed you of a new business opportunity requiring bank support. Borno
State Government has approved a ₦10 billion contract for execution over three (3)
years period. The purpose is to supply drugs and medical equipment to hospitals in
major cities and towns in the state. Part payments will be made in advance for each
tranche of the contract.
Government will pay the monies through your bank provided the bank provides
Advance Payment Guarantee. The first tranche of payment is the sum of ₦2.5 billion.
Currently, the company enjoys an overdraft limit of ₦0.5 billion (₦500m) which will
expire on 31st of March, 2014. The term loan of ₦1.9 billion is due for payment finally
on 31st July, 2016.
They want their facilities renewed.
Victors Supplies Ltd.

Profit and Loss Account for the period ended 31st December 2013
2013 2012
₦‘000 ₦‘000
Turnover 2,736,191 2,047,983
Cost of Sales (1,111,239) (1,060,889)
Gross Profit 1,624,952 987,094
Other Operating Income 3,335 1,109
Marketing Expenses (423,477) (442,936)
Admin Expenses (854,638) (459,553)
Operating Profit /Loss 350,172 85,714
Exceptional item (549,886) -
Operating Profit (Loss After Exceptional item) (199,714) 85,714
Finance Costs (292,055) (322,469)
Loss Before Income Tax (491,769) (236,755)
Taxation (114,447) (60,422)
Loss for the year (606,216) (297,177)
2014/CB/A/02
VICTOR SUPPLIES LTD
BALANCE SHEET AS AT 31ST DECEMBER, 2013
2013 2012
₦ ‘000 ₦‘000
Properties, Plant and Equipment 1,680,648 1,546,153
Investment in Subsidiaries 10,001 10,001
Current Assets:
Inventories 1,010,376 1,079,299
Receivables 1,502,375 1,447,351
Bank and Cash balance 171,160 299,945
2,683,911 2,826,595
Current Liabilities:
Trade and Other Creditors 704,889 456,704
Taxation 11,115 30,245
Borrowings 2,400,476 2,080,639
3,116,480 2,567,588
Net Current (Liabilities)/Assets (432,569) 259,007
Total Current Assets less Current Liabilities 1,258,080 1,815,161
Non-current Liabilities:
Borrowings 77,434 107,835
Deferred Tax 76,600 8,698
Retirement Benefit obligations 204,637 193,003
358,671 309,536
Net Assets 899,409 1,505,625
Capital and Reserves
Revaluation Surplus 1,000,000 1,000,000
Retained Loss (684,003) (77,787)
Total Equity 899,409 1,505,625
2014/CB/A/02
Note to the Account
2013 2012
₦‘000 ₦‘000
Borrowings: Short term 1,890,793 758,795
Bank Loans 373,179 1,238,964
Bank overdraft 136,504 82,880
2,400,476 2,080,639
INVENTORIES:
Raw Materials 486,169 424,406
Finished Goods 107,233 361,837
Work In Progress 85,521 71,676
Goods in Transit 272,002 180,012
Engineering stock 59,451 41,368
1,010,376 1,079,299
2013 2012
₦‘000 ₦‘000
Receivables Requirement:
Trade Receivables 546,774 303,683
Prepayments & Others 114,079 49,609
Due from Associated Companies 841,522 1,094,059
1,502,375 1,447,351
2013 2012
₦‘000 ₦‘000
Depreciation charged 156,970 161,194
Required:
a) Analyse the financial performance of this company in 2013 using the following ratios:
i) Liquidity iv) Gross Profit Margin
ii) Debt to Asset v) Asset utilization or Activity
iii) Interest coverage
and explain whether the financial performance justify the credit request.
(15 Marks)
b) What are the credit risk issues involved in the appraisal of the company’s request for the
advance payment. (5 Marks)
(Total = 20 Marks)
2014/CB/A/02
Question 5
Chief Owonikoko, the proprietor of RAINBOW Furniture Enterprises calls at the branch with the
latest sets of accounts as detailed below. He indicates that it is his intention to double his
turnover of ₦150million made at the end of last financial year in the forthcoming year. He
therefore request that the existing overdraft facility be increased from ₦90million to
₦180million.
RAINBOW FURNITURE ENTERPRISES
₦‘000 ₦‘000 ₦‘000
Fixed Assets 60,000
Stock 220,000
Debtors 200,000
Total current Assets 420,000
Current Liabilities
Creditors 250,000
Tax 15,000
Bank 80,000
Total current Liabilities 345,000
Net current Assets 75,000
135,000
Capital 90,000
Profit and Loss Account 45,000
135,000
Required:
Set out, in note form, the points you would raise indicating whether you will agree to the
request and if not state your reasons. (20 Marks)
2014/CB/A/02
Question 6
a) What are the pre-conditions for effective risk management in Deposit Money Banks? (9
Marks)
b) Both Equipment Leasing and Hire-Purchase are means of acquiring certain types of fixed
assets. Enumerate four (4) benefits of each facility to a bank customer.
(8 Marks)
c) State three (3) factors that determine the choice of these credit facilities.
(3 Marks)
(Total 20 Marks)
SECTION C
Question 7
a) Jackson Bank Plc is concerned that income has dwindled inspite of the increase in loan
portfolio. Management of the Bank has traced this to the poor loan pricing methods.
Required:
State other factors that can reduce income in the scenario painted above.
(9 Marks)
b) Abubakar Enterprises is a company registered as industrial caterers and events managers.
They operate an account with the Kano (main) Branch of your bank. Today you received a
proposal for a ₦400 million term loan to establish a 5-star hotel in Sabon Gari Area, Kano.
Required:
Itemize the contents and highlight key issues you would expect to find in the feasibility report
backing the credit request. (11 Marks)
(Total 20 Marks)
Question 8
a) Define credit fraud and identify eight (8) examples of credit fraud commonly recorded in
banks. (10 Marks)
b) How can credit fraud be reduced or eliminated in banks? (10 Marks)
(Total 20 Marks)
2014/CB/A/02
SECTION A
Question1
Banks that were taken over by the Central Bank of Nigeria (CBN) in 2009 Banking Sector
Reform were alleged to have weak credit culture and widespread breaches of their Credit
Policies by the executive management.
Required:
a) What is credit culture? State and explain four (4) major types of credit culture.
(10 Marks)
b) What is credit standard in relation to credit culture. (10 Marks)
(Total 20 Marks)
Question 2
Discuss the various points/issues that must be examined and agreed with the borrowing
customer by the bank before lending decision is reached. (20 Marks)
Question 3
a) You are the credit officer of your bank and were invited to the symposium of the Banking
and Finance Students Association of the Success University to talk on ‘‘the general principles of
good lending’’ also known as cannons of good lending. You are required to state and explain
five (5) general or cannons of good bank lending. (15 Marks)
b) Explain how bankers reconcile the banking concepts of liquidity and profitability.
(5 Marks)
(Total 20 marks)
2014/CB/A/02
SECTION B
Question 4
Yesterday you met the Chief Executive Officer (CEO) of Victor Supplies Ltd. at the Club
House. He informed you of a new business opportunity requiring bank support. Borno
State Government has approved a ₦10 billion contract for execution over three (3)
years period. The purpose is to supply drugs and medical equipment to hospitals in
major cities and towns in the state. Part payments will be made in advance for each
tranche of the contract.
Government will pay the monies through your bank provided the bank provides
Advance Payment Guarantee. The first tranche of payment is the sum of ₦2.5 billion.
Currently, the company enjoys an overdraft limit of ₦0.5 billion (₦500m) which will
expire on 31st of March, 2014. The term loan of ₦1.9 billion is due for payment finally
on 31st July, 2016.
They want their facilities renewed.
Victors Supplies Ltd.

Profit and Loss Account for the period ended 31st December 2013
2013 2012
₦‘000 ₦‘000
Turnover 2,736,191 2,047,983
Cost of Sales (1,111,239) (1,060,889)
Gross Profit 1,624,952 987,094
Other Operating Income 3,335 1,109
Marketing Expenses (423,477) (442,936)
Admin Expenses (854,638) (459,553)
Operating Profit /Loss 350,172 85,714
Exceptional item (549,886) -
Operating Profit (Loss After Exceptional item) (199,714) 85,714
Finance Costs (292,055) (322,469)
Loss Before Income Tax (491,769) (236,755)
Taxation (114,447) (60,422)
Loss for the year (606,216) (297,177)
2014/CB/A/02
VICTOR SUPPLIES LTD
2013 2012
₦ ‘000 ₦‘000
Properties, Plant and Equipment 1,680,648 1,546,153
Investment in Subsidiaries 10,001 10,001
Current Assets:
Inventories 1,010,376 1,079,299
Receivables 1,502,375 1,447,351
Bank and Cash balance 171,160 299,945
2,683,911 2,826,595
Current Liabilities:
Trade and Other Creditors 704,889 456,704
Taxation 11,115 30,245
Borrowings 2,400,476 2,080,639
3,116,480 2,567,588
Net Current (Liabilities)/Assets (432,569) 259,007
Total Current Assets less Current Liabilities 1,258,080 1,815,161
Non-current Liabilities:
Borrowings 77,434 107,835
Deferred Tax 76,600 8,698
Retirement Benefit obligations 204,637 193,003
358,671 309,536
Net Assets 899,409 1,505,625
Revaluation Surplus 1,000,000 1,000,000
Retained Loss (684,003) (77,787)
Total Equity 899,409 1,505,625
2014/CB/A/02
Note to the Account
2013 2012
₦‘000 ₦‘000
Borrowings: Short term 1,890,793 758,795
Bank Loans 373,179 1,238,964
Bank overdraft 136,504 82,880
2,400,476 2,080,639
INVENTORIES:
Raw Materials 486,169 424,406
Finished Goods 107,233 361,837
Work In Progress 85,521 71,676
Goods in Transit 272,002 180,012
Engineering stock 59,451 41,368
1,010,376 1,079,299
2013 2012
₦‘000 ₦‘000
Receivables Requirement:
Trade Receivables 546,774 303,683
Prepayments & Others 114,079 49,609
Due from Associated Companies 841,522 1,094,059
1,502,375 1,447,351
2013 2012
₦‘000 ₦‘000
Depreciation charged 156,970 161,194
Required:
a) Analyse the financial performance of this company in 2013 using the following ratios:
i) Liquidity iv) Gross Profit Margin
ii) Debt to Asset v) Asset utilization or Activity
iii) Interest coverage
and explain whether the financial performance justify the credit request.
(15 Marks)
b) What are the credit risk issues involved in the appraisal of the company’s request for the
advance payment. (5 Marks)
(Total = 20 Marks)
2014/CB/A/02
Question 5
Chief Owonikoko, the proprietor of RAINBOW Furniture Enterprises calls at the branch with the
latest sets of accounts as detailed below. He indicates that it is his intention to double his
turnover of ₦150million made at the end of last financial year in the forthcoming year. He
therefore request that the existing overdraft facility be increased from ₦90million to
₦180million.
RAINBOW FURNITURE ENTERPRISES
₦‘000 ₦‘000 ₦‘000
Fixed Assets 60,000
Stock 220,000
Debtors 200,000
Total current Assets 420,000
Current Liabilities
Creditors 250,000
Tax 15,000
Bank 80,000
Total current Liabilities 345,000
Net current Assets 75,000
135,000
Capital 90,000
Profit and Loss Account 45,000
135,000
Required:
Set out, in note form, the points you would raise indicating whether you will agree to the
request and if not state your reasons. (20 Marks)
2014/CB/A/02
Question 6
a) What are the pre-conditions for effective risk management in Deposit Money Banks? (9
Marks)
b) Both Equipment Leasing and Hire-Purchase are means of acquiring certain types of fixed
assets. Enumerate four (4) benefits of each facility to a bank customer.
(8 Marks)
c) State three (3) factors that determine the choice of these credit facilities.
(3 Marks)
(Total 20 Marks)
SECTION C
Question 7
a) Jackson Bank Plc is concerned that income has dwindled inspite of the increase in loan
portfolio. Management of the Bank has traced this to the poor loan pricing methods.
Required:
State other factors that can reduce income in the scenario painted above.
(9 Marks)
b) Abubakar Enterprises is a company registered as industrial caterers and events managers.
They operate an account with the Kano (main) Branch of your bank. Today you received a
proposal for a ₦400 million term loan to establish a 5-star hotel in Sabon Gari Area, Kano.
Required:
Itemize the contents and highlight key issues you would expect to find in the feasibility report
backing the credit request. (11 Marks)
(Total 20 Marks)
Question 8
a) Define credit fraud and identify eight (8) examples of credit fraud commonly recorded in
banks. (10 Marks)
b) How can credit fraud be reduced or eliminated in banks? (10 Marks)
(Total 20 Marks)
2017/CB/A/01
SECTION A: BANKING LAW
Question 1
S.13(I) of The Chartered Institute of Bankers, Act 1990 provides that “there shall be a Tribunal
to be known as the Chartered Institute of Bankers Disciplinary Tribunal (CIBDT) which shall be
charged with the duty of considering and determining any case referred to it by the
investigating panel established under the Act”.
(a) What is the composition of the Disciplinary Tribunal? (3 marks)
(b) What are the circumstances specified by the Act under which a banker may have his or her
name struck off from the Register of Bankers? (10 marks)
(c) Apart from ordering the Registrar of CIBN to strike off the name of a banker from the
register, what other step could be taken by the tribunal? (3 marks)
(d) Mention two (2) professional misconduct of a banker known to you. (4 marks)
(Total = 20 marks)
Question 2
(a) Chief Sharpman has recently approached Ethical Bank Plc for a loan on the strength of a
Certificate of Occupancy which he has procured in respect of a landed property which he
inherited from his father. The land is situated at Ikorodu, Lagos State.
This vast land which is yet to be developed, has been confirmed to belong to Chief Sharpman
following search conducted at the appropriate offices. Chief Sharpman is indeed the owner of
the land.
However, the land has been uncultivated with no development on it whatsoever. Chief
Sharpman has also been in peaceful ownership for more than 10 years and now desires a loan
from Ethical Bank, while staking his Certificate of Occupancy and the interest on the land as
security for the loan of Thirty Million Naira Only (N30,000,000.00). The land is valued at One
Hundred Million Naira Only (N100,000,000.00)
Advise the Bank, based on the provisions of the Land Use Act 2004 on the propriety or
otherwise of acceding to the loan request. (12 marks)
(b) Distinguish between a second mortgage and a sub-mortgage. (8 marks)
2017/CB/A/01
Question 3
Mr. Michael is a customer of Reliance Bank Plc. He was recently adjudicated bankrupt and the
Branch Manager seeks your advice on the following:
(a) Whether cheques presented for payment from the account should be honoured? (5 marks)
(b) What the bank can do in respect of the title documents deposited with it as collateral for
the overdraft facility granted to Mr. Michael. (5 marks)
(c) What are the Assets of Mr. Michael that cannot be realized under the bankruptcy
proceeding? (5 marks)
(d) How can Mr. Michael be discharged? (5 marks)
(Total = 20 marks)
SECTION B: ETHICS
Question 4
(a) Discuss how a breach of duty to honour the cheque of a customer may lead to ethical
problems for the banks. (8 marks)
(b) Mention any remedy or remedies for an unjustified breach of the important duty by banks.
(6 marks)
(c) Are there circumstances when the bank may be justified when the duty is breached? State
the circumstances (if any). (6 marks)
(Total = 20 marks)
Question 5
(a) What is the role of Choice in the concept of Ethics? (5 marks)
(b) Write short notes on the following as important determinants of ethical behaviour:
(i) Greed
(ii) Contentment
(iii) Altruism (15 marks)
2017/CB/A/01
Question 6
The main reason for the establishment of economic institutions in a free market system is the
maximisation of profit, healthy competition and possible monopoly of the market. Therefore,
the only parameter for the measurement of success of such institutions is profit at the expense
of ethics and social responsibility.
(a) Do you agree or disagree with this statement? (5 marks)
(b) Discuss the parameters fully and give your opinion on what
should be the attitude. (15 marks)

(Total = 20 marks)
SECTION C: CORPORATE GOVERNANCE

Question 7
(a) Identify the main recommendations of the Cadbury Report regarding non-executive
directors and elaborate on the recommendation that “Control of a Company should be
exercised by the board of directors as a whole”.
(10 marks)
(b) How can good Corporate Governance improve the stock market performance of a listed
company? (10 marks)
(Total = 20 marks)
Question 8
(a) Write short notes on the following:
(i) The meaning of a director within the context of the Companies and Allied Matters Act CAP
C20 LFN 2004. (6 marks)
(ii) The duties of directors in a company. (8 marks)
(b) Highlight the salient landmarks of sound corporate governance practices and articulate the
role of supervisors in corporate performance of banks. (6 marks)
(Total = 20 marks)
2017/CB/B/01
Question 1
S.2 of the Banks and other Financial Institutions Act (as amended) provides that “No person
shall carry out any banking business in Nigeria except if it is a company duly incorporated in
Nigeria and holds a banking licence issued under the Act by virtue of Companies and Allied
Matters Act. One of the documents a Company requires for incorporation is the Memorandum
of Association.
(a) State clearly the items that must be stated in the Memorandum of Association
(10 marks)
(b) Itemise the practical importance of the content of the Memorandum of Association to
the business of a bank?
(10 marks)
(Total = 20 marks)
Question 2
Discuss the following under the Bills of Exchange Act.

(i) Define Bill of Exchange
(ii) The Drawer of a Bill
(iii) The Drawee of a Bill
(iv) Negotiations of a Bill
(v) A bill payable at a determinable future time (4 marks each)
(Total = 20 marks)
Question 3
(a) State what you understand as “Security” in a banker/customer relationship?
(b) State the various ways by which a contract of guarantee can be determined.
(c) What do you understand by “Adjudication Order” in Bankruptcy?
(d) What is First Meeting of Creditors under the Bankruptcy Act and of what significance
is it? (5 marks each)
(Total = 20 marks)
2017/CB/B/01
SECTION B: ETHICS
Question 4
Write short notes on each of the following:

(i) Conflict of interest
(ii) Actual and potential conflicts of interest
(iii) Insider Trading
(iv) Unfair competition
(5 marks each)
(Total = 20 marks)
Question 5
(a) In order to promote high and sustainable ethical standards in an organisation, the Board
of Directors must provide an Ethics Programme. What do you understand by “Ethics
Programme”? (5 marks)
(b) What are the benefits of an Ethics Programme? (15 marks)
(Total = 20 marks)
Question 6
Ifeoma is a charming damsel employed by Josco Bank with a 3rd class degree in Physical
Education. Josco Bank is under the radar of the Central Bank of Nigeria as one of the
distressed and failing banks with the ultimatum to recapitalise within six months or have its
licence revoked. During the competitive interview, Ifeoma came last but was given the job
because of Mr. Johnson, the Executive Director, Human Resources, who was interested in
having her as his girlfriend. After her employment, she was deployed to the Marketing
Department to solicit for customers with huge deposit potential. Ifeoma was able to convince
Collins, a drug baron, to deposit N50, 000,000 in fixed deposit with the bank to the knowledge
of Mr. Shau, the Executive Director, Operations. When the Managing Director was informed,
he jubilated and approved payment of commission to Ifeoma as one of the “saviours” of the
bank.
Examine the ethical issues involved. (Total = 20 marks)
2017/CB/B/01
Question 7
(a) Identify the duties of Directors as stated under S.279 of the Companies and Allied
Matters Act.
(10 marks)
(b) In what circumstances will a Director have to vacate his office under the Companies
and Allied Matters Act? (10 marks)
(Total = 20 marks)
Question 8
(a) Explain the term “Self-Regulation” as it relates to the financial services industry.
(10 marks)
(b) Itemise five (5) Self-Regulatory Institutions in the financial services industry.
(10 marks)
(Total = 20 marks)
2014/CB/A/01
Question 1
(a) What is the mandatory disclosure required of financial institutions under Section 10(1) of
Money Laundering Prohibition Act 2011 and what is the penalty for contravention of the
provision? (10 marks)
(b) Dr. Wisdom recently issued a cheque for the sum of N1,000,000 in favour of the Medical
and Dental Council being arrears of payment for his practice licence. The cheque was
presented by the Council and it was dishonoured. The Council reported the matter to the police
and the latter have decided to charge the Doctor under the Dishonoured Cheque Offences Act.
(i) In the circumstance of the above, state the facts of the offence under the Act. (4 marks)
(ii) What is the prescribed penalty under the Dishonoured Cheques (Offences) Act 3? (3 marks)
(iii) State any defence to the offence stated in the Act. (3 marks)
Total = (20 marks)
Question 2
(a) What do you understand as Acts of Bankruptcy under the Bankruptcy Act 2004? (10 marks)
(b) Outline in details the adverse effect of adjudication of a debtor as a bankrupt under Section
126 of the Bankruptcy Act. (10 marks)
Total = (20 marks)
Question 3
(a) Briefly distinguish between ownership and possession. (6 marks)
(b)i Explain what you understand as “Bill of Lading” stating its functions and how it can be
utilized as a security for bankers’ advance to importers.
(8 marks)
ii. Define the words, “Premium”, “Surrender Value” and insurable interest as used in life policies
as security for bankers’ advance. (6 marks)
Total = (20 marks)
2014/CB/A/01
SECTION B: ETHICS
Question 4
Discuss briefly each of the following basic principles of ethics:
(i) Virtues
(ii) Vices
(iii) Greed
(iv) Satisfaction
(v) Reward
(vi) Integrity
(vii) Freewill
(viii) Loyalty
(ix) Justice
(x) Discipline
(2 marks each = 20 marks)
Question 5
(i) Write a comprehensive statement on the requirement of disclosure by Directors of
companies having interest in contracts with the company.
(8 marks)
(ii) State fully the legal position of Directors under Section 283 of the Companies and Allied
Matters Act (as amended). (12 marks)
Total = (20 marks)
Question 6
(a) (i) Who are stakeholders? (4 marks)
(ii) Explain what needs to be done for the benefit of each stakeholder.
(8 marks)
(b) What are the rights of shareholders of a company? (8 marks)
Total = (20 marks)
2014/CB/A/01
Question 7
(a) What is self-regulation in the financial services industry in Nigeria? (5 marks)
(b) Mention 5 self-regulatory bodies or institutions within the financial services industry in
Nigeria. (10 marks)
(c) What are the roles of the Chartered Institute of Bankers Disciplinary Committee? (5 marks)
Total = (20 marks)
Question 8
Explain the roles and responsibilities of:
(a) the Board of Directors; and
(b) the Shareholders
in promoting and sustaining sound corporate governance in banking institutions.
(20 marks)
2015/IP/A/04
SECTION A
Question 1
(i) Theory of comparative advantage demonstrates that mutually advantageous trade

cannot occur when one trading partner has an absolute advantage.
True or False.
(ii) All but one factor out of the following influences the price of an option:
(a) Volatility
(b) Intrinsic value
(c) Locations
(d) Length of period
(iii) Which country uses the currency ‘KRONA’

(iv) _________________ is an arrangement by which two parties exchange one currency
for another and agree that the exchange will be revised at a stipulated date in the
future.
(a) Arbitrage
(b) Swap
(c) Option
(d) Hedge
(v) The law of one price simply states that in the presence of a competitive market,
structure and the absence of transport costs and other barriers to trade, identical
products which are sold in different markets will ___________
(a) Sell at the same price when expressed in terms of a common currency
(b) Sell at a floating rate when expressed in terms of a common currency
(c) Sell at a different price when expressed in terms of a common currency
(d) Sell at a cross rate when expressed in terms of a common economy
(vi) __________________ is the sensitivity of the real domestic currency value of assets
and liabilities appearing in the financial statements to unanticipated changes in
exchange rates.
(a) Translation Exposure

(b) Transaction Exposure
(c) Economic Exposure
(d) Option Exposure
2015/IP/A/04
(vii) If an SME has an exceptionally large transaction which had been quoted in foreign
currency, and/or there exists a significant time period between quote and acceptance
of the offer, _________________________ will be worth considering:
(a) Fx Option
(b) Fx Transaction
(c) Fx Cross Rate
(d) Fx Forward
(viii) The relationship between the exchange rate and the prices of tradable goods is known
as:
(a) Purchasing Power Parity theory

(b) Asset-markets theory
(c) Monetary theory
(d) Balance of payment theory
(ix) UNCTAD is a United Nation Institution that:
(a) Makes loans to poor countries only

(b) Represents the interests of developing countries
(c) Enforces intellectual property rights
(d) Administers international treaties regarding labour standards and rights
(x) In URC Publication No. 522, ________________ states that all banks must act in good
faith and exercise reasonable level of care.
(xi) Jane Nigeria Ltd instructed your bank to purchase US$10,000 through CBN Retail
Dutch Auction system at N155 per dollar. Determine the All-in rate at which the
customer’s account will be debited bearing in mind the CBN commission and the bank
spread of 50 kobo.
(a) N157.05
(b) N156.50
(c) N158.05
(d) N155.50
(xii) A Yen bond issued by a British company in the Japanese market is known as:
(a) Matadors
(b) Yankee
(c) Samurais
(d) Bulldogs
2015/IP/A/04
(xiii) A trading strategy based on the purchase of commodity, including foreign exchange
in one market at one price while simultaneously selling it in another market at a more
advantageous price in order to obtain a more free profit on the price differential is
known as ____________________________________
(xiv) A situation in which foreign currency assets of a firm exceed foreign currency
liabilities is referred to as __________________________________________
(a) Short position

(b) Medium position
(c) Long position
(d) Weak position
(xv) From the exporter’s point of view, the most favourable incoterm is:
(a) FCA
(b) CPT
(c) CIP
(d) DAT
(xvi) Discounting of long-term financial instruments particularly for capital goods in the
importer’s country but for the benefit of the exporter is known as ______
(xvii) The risk bearing services of Nigeria Export-Import Bank are all but one of the
following:
(a) Export credit guarantee

(b) Rediscounting and refinancing facility
(c) Export credit insurance facility
(d) Investment guarantee and investment insurance
(xviii) Unutilised RDA funds must be repatriated to CBN within ________________
(a) 7 working days

(b) 5 working days
(c) 10 working days
(d) 2 working days
(xix) _____________ is a letter of credit which provides for the amount of credit to be
reinstated without the need to renew the credit or open a new credit.
(xx) The platform through which authorised dealers electronically registered Form ‘M’ for
approval is called __________________________________________
(40 marks)
2015/IP/A/04
SECTION B
PART I
Question 2
The Central Bank of Nigeria (CBN) report of its regulatory functions has the ‘Import
Guidelines, Procedures and Documentation Requirements” under the Destination Inspection
Scheme of Nigeria.
Required:
(a) List the Documentation Requirements for Import Payment under the Destination
Inspection Scheme. (10 marks)
(b) List the documents to be submitted by the Importer to the processing bank after
clearance of goods. (5 marks)
(Total = 15 marks)
Question 3
Emmyk Produce Limited is one of your premium customers who is into export operations to
countries in Asia and East Europe. You called at their newly opened corporate office to
discuss a new contract which the company is about to start with a Ukrainian firm.
Investigations show that the company is to sell coal, wood and ginger to a major Ukrainian
firm.
The Chief Executive Officer, Mr. Emeka Ikem explained that the Ukrainian buyer will arrange
undertaking in favour of Emmyk Produce Limited and requested your bank to arrange pre-
delivery finance for the contract value of N25 million. The net margin for the company is
25% and short term credit for 3 months is required.
Required:
(a) Write brief notes on the arrangement which is available outside normal bank lending
and which will not have a significant adverse effect on the balance sheet.
(10 marks)
(b) What are the advantages and disadvantages of such arrangement? (5 marks)
(Total = 15 marks)
2015/IP/A/04
Question 4
(a) An exporter, who is a customer of your bank hands you a documentary collection. What
is your bank’s liability regarding examination of the documents, and what other points
would the bank check for in practice?
(10 marks)
(b) List at least five (5) inoperative amendment clauses to a documentary letter of credit.
(5 marks)
(Total = 15 marks)
PART II
Question 5
As reported by one of the financial papers in Nigeria on March 1, 2014, “crude oil price
climbed on Monday on workers’ strike in Nigeria and a typical storm expected to disrupt the
United States crude oil market”.
The price of reference Brent North sea crude oil for May delivery climbed to $89 per barrel
thereby affecting forward markets cost which now stands at 11.65%.
Required:
(a) What is the March 1, 2014 exchange rate (spot market rate)? (8 marks)
(b) Rationalise the relative forward margin per month for the period of the contract
mentioned assuming all economic indices remain constant throughout the period.
(2 marks)
(c) What are the implications of the market situation between March 1 and May 30 on
crude oil market in Nigeria? (5 marks)
(Total = 15 marks)
Question 6
(a) Exchange rate in Yen/Naira (Y/N) in the interbank market is given as

26.8967/9.2335.
An exporter requests his bank to purchase a bill for Y350,000.
(i) What rate should the bank quote to the exporter if the bank requires an
exchange margin of 0.20%.? (5 marks)
(ii) What is the interest on export finance to be recovered from the exporter if the
transaction period of the export bill is 25 days and the rate of interest is 8%?
(5 marks)
2015/IP/A/04
(b) Briefly explain the four methods of translation exposure in international finance.
(5 marks)
(Total = 15 marks)
Question 7
Write short notes on the following:
(i) International Finance Corporation (5 marks)

(ii) Multilateral Investment Guarantee Agency (5 marks)
(iii) Islamic Development Bank (5 marks)
(Total = 15 marks)
2017/IP/B/04
SECTION A
This section contains Multiple Choice Question(s) (MCQ) and Short Answer Questions (SAQ).
Indicate the correct alphabet as answer to the MCQ and provide the answer(s) to the SAQ.
(All Questions carry equal marks – 2 marks each, Total = 40 marks)
Question 1
(vi) The US$/Japanese Yen exchange rate is $0.97/Yen, while the US$/Indian Rupee rate
is $0.25/INR. Determine the Yen/INR exchange rate.
(a) Yen 0.2577/INR
(b) Yen 3.8800/INR
(c) Yen 2.1071/INR
(d) Yen 0.2742/INR
(vii) A financial contract giving the owner the right, but not an obligation to buy or sell a
given quantity of an asset at a specified price sometime in the future is:
(a) Option
(b) Put
(c) Call
(d) Straddle
(viii) When banks establish branches and subsidiaries abroad, it is referred to as:
(a) International Banking
(b) Multinational Banking
(c) Correspondent Banking
(d) Agency Banking
(ix) A bond issue that is simultaneously sold and consequently traded in major Financial
Markets is:
(a) Global bond
(b) Foreign bond
(c) Worldwide bond
(d) International bond
(x) What is the Forward rate if the discount on the US$ narrowed further and for three
(3) months settled at N6 or 5.50% to affect all periods up to a year as an indication
of unwinding leads and lags?
a. 75.2135
b. 82.7011
c. 72.7272
d. 73.3224
(xi) All but ONE of the following assumptions does not agree with Heckscher – Ohlin
Model:
(a) There are only two countries but similar in factor endowments quantity.
(b) There are only two factors of production i.e. Labour and Capital.
(c) There are only two commodities.
(d) There are only two countries but differ in factor endowments quantity, that is, one
country possesses more of one than other interchangeably.
2017/IP/B/04
(xii) Exchange rate risk can better be described under one of the following classifications:
a. Economic Risk, Translation Risk and Transaction Risk.
b. Economic risk, Liquidity Risk and Transaction Risk.
c. Economic Risk, Liquidity Risk and Credit Risk.
d. Translation Risk, Transaction Risk and Liquidity Risk.
(xiii) All but ONE of the following are features of Global Depository Receipt (GDR):
a. It is a secured security
b. It is listed and traded on the stock exchange
c. It is an unsecured security
d. It may be converted into shares
(xiv) All but ONE of the following are causes of Exchange Rate fluctuations:
(a) Trade movement, capital movement and stock exchange movement.
(b) Capital movement, labour movement and stock exchange operations.
(c) Speculative transaction, Trade movement and Banking Operations.
(d) Political conditions, Monetary Policy and Speculative Transaction.
(xv) The international organisation established to promote exchange rate stability and
provide temporary financing for countries experiencing balance of payments
difficulties is _________________.
(xvi) The most favoured clause of the World Trade Organisation requires that each member
must:
(a) Offer to all member countries the same trade concessions offered to any member
country.
(b) Offer to all member countries concessions as may be determined by the home
country to any member country.
(c) Chose one foreign member as its most favoured trading nation and give that
country its generous trade concession.
(d) Offer some trade concession to any other member country offering it a trade
concession.
(xvii) A perfect hedge (full range) on transaction exposure can usually be achieved when:
(a) Using the money market hedge.
(b) Using the forward hedge.
(c) Using the futures hedge.
(d) None of the options since a perfect hedge is nearly impossible.
(xviii) With floating exchange rate, a monetary contraction causes:

(a) Capital inflow
(b) Exchange rate to depreciate
(c) The interest rate to fall
(d) None of the options
2017/IP/B/04
(xix) Which of the following is not an incentive available to operators in the Free Trade
Zones in Nigeria?
(a) Up to 50% of the products may be sold in the domestic market.

(b) Foreign ownership allowed is not more than 50%.
(c) Repatriation of Foreign Capital Investment allowed anytime.
(d) No import or export licence is required.
(xx) A type of international trade financing where long-term financial instruments such as
Bill of Exchange or Promissory notes are discounted for capital goods in the importer’s
country but for the benefit of the exporter is known as ______.
(xxi) A letter of credit that allows the seller to receive a part of the documentary credit
amount as an advance payment before the fulfillment of all the conditions stated in
the documentary credit is known as ________________.
(xxii) The rate of inflation in France over the next one year is estimated to grow at 8% and
in Nigeria over the same period at 12%, while the spot rate is Euro/N235.7250 in the
parallel foreign exchange market. What is the expected Forward Rate on one (1) year
Forward Market?
(a) N240.4468
(b) N244.4468
(c) N245.4468
(d) N242.4468
(xxiii) Where the price quoted on the invoice by the exporter include all cost under the Cost
Insurance and Freight (CIF) contract but additional responsibilities up to the importer’s
warehouse are inserted is found in:
a. CPI
b. CIP
c. DDP
d. DAP
(xxiv) A quotation in which the home currency unit is expressed in variable units of Foreign
currency is called:
a. Direct Rate
b. Spot Rate
c. Indirect Rate
d. Forward Rate
(xxv) The economic theory that links exchange rates, price levels and interest rate is called:
a. Law of one price
b. Nominal effective Exchange rate
c. International parity condition
d. Fisher Effect
(Total = 40 marks)
2017/IP/B/04
SECTION B
PART I
Question 2
Mr. Goriola, the Import Manager of one of your valued customers called at your office today
and complained about the features of the document received from your bank under the
confirmed irrevocable documentary letters of credit opened in favour of their foreign
suppliers.
The document comprised of copies made by carbonized facsimile and other reprographic
means EXCEPT for the Bill of Lading. He also observed that some of the documents were
not signed by the foreign exporter and therefore not properly drawn in accordance with the
terms and conditions of the documentary letters of credit.
Required:
(a) Justify your actions in accepting these documents with reference to the relevant
provisions of UCP 600. (10 marks)
(b) What protection, if any that are available to the bank? (3 marks)
(c) What would be the bank’s position if some of these documents were dated before the
due date on the letters of credit? (2 marks)
(Total = 15 marks)
Question 3
Capital Market is concerned primarily with the provision of international liquidity.
Required:
(a) (i) What is International Liquidity? (2 marks)
(ii) List four (4) purposes of International Liquidity (4 marks)
(b) Succinctly explain the markets of operations involved in International Capital Market.
(9 marks)
(Total = 15 marks)
2017/IP/B/04
Question 4
The Managing Director of Ayox Nigeria Limited, a company that operates in the local markets
has large export orders from foreign buyers as a direct effect of their participation in a Trade
Fair which they attended recently in USA. The Managing Director called in your office today
and informed you of the breakthrough into the Exports Market and would require your expert
advice on this issue.
Required:
(i) Briefly advise your customer on Export Trade in Nigeria. State six (6) points.
(6 marks)
(ii) What are the services that are available to this type of customer who breaks into the
export market for the first time (state six points to include three banking and three non-
bank services). (6 marks)
(iii) State conditions precedent to export activities by a Nigeria company under the relevant
exchange control regulations. (3 marks)
(Total = 15 marks)
PART II
Question 5
You have called your favourite Bureau De Change operators and required a quotation on the
Naira/US dollar exchange rate for spot, one month, three months and six months forward
rates. The dealer subsequently responded with the following SWAP quotation N/$ 166/8, ¾,
7/5, 9/7.
Required:
(a) Express the above quotation in the outright way:
(i) If you wanted to buy $1000 spot, how much would you have to pay in Naira.
(5 marks)
(ii) If you wanted to invest N9,420,000 in US dollars, six months forward, how
much would that cost you in dollars at the quoted rate. (5 marks)
(b) Calculate the premium/discount in annual percentage for the one month and three
months forward quotations.
(Assuming you are a buying client). (5 marks)
2017/IP/B/04
Question 6
Your customer Frank-Derese Limited, on 1st April informed you they were expecting currency
receipts and payments during the next three months. They seek your professional advice as
to the protection against possible fluctuations in rates of exchange.
Suggest what action will be taken regarding the following transactions.
Receipts:
(i) Japanese Yen 200,000 is expected within the next two months.
(ii) Bank accepted bill US$ 75,000 due on 4th May covering supply made to Yankee & Co
of New York.
(iii) Euro 90,000 on 13th May from Germany for goods shipped from United Kingdom.
(iv) SwFr 10,000 on the 5th June for goods dispatched from France to Switzerland.
(8 marks)
Payments:
(v) The equivalent in Pounds Sterling of Euro 90,000 received from Germany to United
Kingdom supplier.
(vi) Japanese Yen 1,500,000 to Japanese supplier due 30th April.
(vii) SwFr 10,000 on 10th April to France for goods dispatched to Switzerland
(7 marks)
(Total = 15 marks)
Question 7
The SEPA aims to harmonize the process of paying for goods and services in Europe so that
business and consumers can make a cross-border purchase within the region the same way
as domestic transactions.
Required:
(a) What is SEPA and what are its benefits? (9 marks)
(b) Briefly explain the EU Regulations defining mandatory deadlines for migration to SEPA.
(6 marks)
(Total = 15 marks)
2017/IP/B/04
SECTION A
Question 1
(xxvi) The US$/Japanese Yen exchange rate is $0.97/Yen, while the US$/Indian Rupee rate
(e) Yen 0.2577/INR
(f) Yen 3.8800/INR
(g) Yen 2.1071/INR
(h) Yen 0.2742/INR
(xxvii) A financial contract giving the owner the right, but not an obligation to buy or sell a
(e) Option
(f) Put
(g) Call
(h) Straddle
(xxviii) When banks establish branches and subsidiaries abroad, it is referred to as:
(e) International Banking
(f) Multinational Banking
(g) Correspondent Banking
(h) Agency Banking
(xxix) A bond issue that is simultaneously sold and consequently traded in major Financial
Markets is:
(e) Global bond
(f) Foreign bond
(g) Worldwide bond
(h) International bond
(xxx) What is the Forward rate if the discount on the US$ narrowed further and for three
a. 75.2135
b. 82.7011
c. 72.7272
d. 73.3224
(xxxi) All but ONE of the following assumptions does not agree with Heckscher – Ohlin
Model:
(e) There are only two countries but similar in factor endowments quantity.
(f) There are only two factors of production i.e. Labour and Capital.
(g) There are only two commodities.
(h) There are only two countries but differ in factor endowments quantity, that is, one
2017/IP/B/04
(xxxii) Exchange rate risk can better be described under one of the following classifications:
(xxxiii) All but ONE of the following are features of Global Depository Receipt (GDR):
(xxxiv) All but ONE of the following are causes of Exchange Rate fluctuations:
(e) Trade movement, capital movement and stock exchange movement.
(f) Capital movement, labour movement and stock exchange operations.
(g) Speculative transaction, Trade movement and Banking Operations.
(h) Political conditions, Monetary Policy and Speculative Transaction.
(xxxv) The international organisation established to promote exchange rate stability and
(xxxvi)The most favoured clause of the World Trade Organisation requires that each member
must:
(e) Offer to all member countries the same trade concessions offered to any member
country.
(f) Offer to all member countries concessions as may be determined by the home
(g) Chose one foreign member as its most favoured trading nation and give that
(h) Offer some trade concession to any other member country offering it a trade
concession.
(xxxvii) A perfect hedge (full range) on transaction exposure can usually be achieved
when:
(e) Using the money market hedge.
(f) Using the forward hedge.
(g) Using the futures hedge.
(h) None of the options since a perfect hedge is nearly impossible.
(xxxviii) With floating exchange rate, a monetary contraction causes:

(e) Capital inflow
(f) Exchange rate to depreciate
(g) The interest rate to fall
(h) None of the options
2017/IP/B/04
(xxxix)Which of the following is not an incentive available to operators in the Free Trade
Zones in Nigeria?
(e) Up to 50% of the products may be sold in the domestic market.

(f) Foreign ownership allowed is not more than 50%.
(g) Repatriation of Foreign Capital Investment allowed anytime.
(h) No import or export licence is required.
(xl) A type of international trade financing where long-term financial instruments such as
(xli) A letter of credit that allows the seller to receive a part of the documentary credit
(xlii) The rate of inflation in France over the next one year is estimated to grow at 8% and
Forward Market?
(e) N240.4468
(f) N244.4468
(g) N245.4468
(h) N242.4468
(xliii) Where the price quoted on the invoice by the exporter include all cost under the Cost
a. CPI
b. CIP
c. DDP
d. DAP
(xliv) A quotation in which the home currency unit is expressed in variable units of Foreign
currency is called:
a. Direct Rate
b. Spot Rate
c. Indirect Rate
d. Forward Rate
(xlv) The economic theory that links exchange rates, price levels and interest rate is called:
a. Law of one price
d. Fisher Effect
(Total = 40 marks)
2017/IP/B/04
SECTION B
PART I
Question 2
suppliers.
Required:
(d) Justify your actions in accepting these documents with reference to the relevant
(e) What protection, if any that are available to the bank? (3 marks)
(f) What would be the bank’s position if some of these documents were dated before the
(Total = 15 marks)
Question 3
Required:
(c) (i) What is International Liquidity? (2 marks)

(d) Succinctly explain the markets of operations involved in International Capital Market.
(9 marks)
(Total = 15 marks)
2017/IP/B/04
Question 4
Required:
(iv)Briefly advise your customer on Export Trade in Nigeria. State six (6) points.
(6 marks)
(v) What are the services that are available to this type of customer who breaks into the
(vi)State conditions precedent to export activities by a Nigeria company under the relevant
(Total = 15 marks)
PART II
Question 5
7/5, 9/7.
Required:
(c) Express the above quotation in the outright way:
(iii) If you wanted to buy $1000 spot, how much would you have to pay in Naira.
(5 marks)
(iv) If you wanted to invest N9,420,000 in US dollars, six months forward, how
(d) Calculate the premium/discount in annual percentage for the one month and three
(Total = 15 marks)
2017/IP/B/04
Question 6
Receipts:
(v) Japanese Yen 200,000 is expected within the next two months.
(vi) Bank accepted bill US$ 75,000 due on 4th May covering supply made to Yankee & Co
of New York.
(vii) Euro 90,000 on 13th May from Germany for goods shipped from United Kingdom.
(viii) SwFr 10,000 on the 5th June for goods dispatched from France to Switzerland.
(9 marks)
Payments:
Kingdom supplier.
(7 marks)
(Total = 15 marks)
Question 7
Required:
(c) What is SEPA and what are its benefits? (9 marks)

(d) Briefly explain the EU Regulations defining mandatory deadlines for migration to SEPA.
(6 marks)
(Total = 15 marks)
2017/IP/B/04
INTERMEDIATE PROFESSIONAL LEVEL
INTERNATIONAL TRADE AND FINANCE
Thursday, October 12
Morning
INSTRUCTIONS TO CANDIDATES
(i) Read ALL instructions on the cover of the Answer Booklet carefully.
(ii) Accuracy and neatness will be taken into account in the award of marks.
(iii) Use only ball point pen.
(iv) Maximum marks allotted are as indicated on the questions.
(v) Only non-programmable calculators are allowed.
(vi) Each answer must begin on a new page.

(vii) You are expected to show and attach details of all calculations and reasons for your
conclusions. Every professional advice you may offer should be supported with detailed
rational assumptions.
(viii) Telephone, books, papers or unapproved documents shall not be brought into the
Examination Hall.
(ix) ONLY approved examination documents and writing materials i.e. ball point pen, pencil,
ruler etc. may be brought in.
(x) ATTEMPT - FIVE (5) QUESTIONS IN ALL.
- QUESTION 1 IN SECTION A IS COMPULSORY.

- ANY FOUR (4) QUESTIONS IN SECTION B (NOT MORE THAN 2
QUESTIONS FROM EACH PART OF THE SECTION).
(xi) TIME ALLOWED: 3 HOURS.
Turn Over
2017/IP/B/04
SECTION A
Question 1
(xlvi) The US$/Japanese Yen exchange rate is $0.97/Yen, while the US$/Indian Rupee rate
(i) Yen 0.2577/INR
(j) Yen 3.8800/INR
(k) Yen 2.1071/INR
(l) Yen 0.2742/INR
(xlvii) A financial contract giving the owner the right, but not an obligation to buy or sell a
(i) Option
(j) Put
(k) Call
(l) Straddle
(xlviii) When banks establish branches and subsidiaries abroad, it is referred to as:
(i) International Banking
(j) Multinational Banking
(k) Correspondent Banking
(l) Agency Banking
(xlix) A bond issue that is simultaneously sold and consequently traded in major Financial
Markets is:
(i) Global bond
(j) Foreign bond
(k) Worldwide bond
(l) International bond
(l) What is the Forward rate if the discount on the US$ narrowed further and for three
a. 75.2135
b. 82.7011
c. 72.7272
d. 73.3224
(li) All but ONE of the following assumptions does not agree with Heckscher – Ohlin
Model:
(i) There are only two countries but similar in factor endowments quantity.
(j) There are only two factors of production i.e. Labour and Capital.
(k) There are only two commodities.
(l) There are only two countries but differ in factor endowments quantity, that is, one
2017/IP/B/04
(lii) Exchange rate risk can better be described under one of the following classifications:
(liii) All but ONE of the following are features of Global Depository Receipt (GDR):
(liv) All but ONE of the following are causes of Exchange Rate fluctuations:
(i) Trade movement, capital movement and stock exchange movement.
(j) Capital movement, labour movement and stock exchange operations.
(k) Speculative transaction, Trade movement and Banking Operations.
(l) Political conditions, Monetary Policy and Speculative Transaction.
(lv) The international organisation established to promote exchange rate stability and
(lvi) The most favoured clause of the World Trade Organisation requires that each member
must:
(i) Offer to all member countries the same trade concessions offered to any member
country.
(j) Offer to all member countries concessions as may be determined by the home
(k) Chose one foreign member as its most favoured trading nation and give that
(l) Offer some trade concession to any other member country offering it a trade
concession.
(lvii) A perfect hedge (full range) on transaction exposure can usually be achieved when:
(i) Using the money market hedge.
(j) Using the forward hedge.
(k) Using the futures hedge.
(l) None of the options since a perfect hedge is nearly impossible.
(lviii) With floating exchange rate, a monetary contraction causes:

(i) Capital inflow
(j) Exchange rate to depreciate
(k) The interest rate to fall
(l) None of the options
2017/IP/B/04
(lix) Which of the following is not an incentive available to operators in the Free Trade
Zones in Nigeria?
(i) Up to 50% of the products may be sold in the domestic market.

(j) Foreign ownership allowed is not more than 50%.
(k) Repatriation of Foreign Capital Investment allowed anytime.
(l) No import or export licence is required.
(lx) A type of international trade financing where long-term financial instruments such as
(lxi) A letter of credit that allows the seller to receive a part of the documentary credit
(lxii) The rate of inflation in France over the next one year is estimated to grow at 8% and
Forward Market?
(i) N240.4468
(j) N244.4468
(k) N245.4468
(l) N242.4468
(lxiii) Where the price quoted on the invoice by the exporter include all cost under the Cost
a. CPI
b. CIP
c. DDP
d. DAP
(lxiv) A quotation in which the home currency unit is expressed in variable units of Foreign
currency is called:
a. Direct Rate
b. Spot Rate
c. Indirect Rate
d. Forward Rate
(lxv) The economic theory that links exchange rates, price levels and interest rate is called:
a. Law of one price
d. Fisher Effect
(Total = 40 marks)
2017/IP/B/04
SECTION B
PART I
Question 2
suppliers.
Required:
(g) Justify your actions in accepting these documents with reference to the relevant
(h) What protection, if any that are available to the bank? (3 marks)
(i) What would be the bank’s position if some of these documents were dated before the
(Total = 15 marks)
Question 3
Required:
(e) (i) What is International Liquidity? (2 marks)
(f) Succinctly explain the markets of operations involved in International Capital Market.
(9 marks)
(Total = 15 marks)
2017/IP/B/04
Question 4
Required:
(vii) Briefly advise your customer on Export Trade in Nigeria. State six (6) points.
(6 marks)
(viii) What are the services that are available to this type of customer who breaks into the
(ix)State conditions precedent to export activities by a Nigeria company under the relevant
(Total = 15 marks)
PART II
Question 5
7/5, 9/7.
Required:
(e) Express the above quotation in the outright way:
(v) If you wanted to buy $1000 spot, how much would you have to pay in Naira.
(5 marks)
(vi) If you wanted to invest N9,420,000 in US dollars, six months forward, how
(f) Calculate the premium/discount in annual percentage for the one month and three
(Total = 15 marks)
2017/IP/B/04
Question 6
Receipts:
(ix) Japanese Yen 200,000 is expected within the next two months.
(x) Bank accepted bill US$ 75,000 due on 4th May covering supply made to Yankee & Co
of New York.
(xi) Euro 90,000 on 13th May from Germany for goods shipped from United Kingdom.
(xii) SwFr 10,000 on the 5th June for goods dispatched from France to Switzerland.
(10marks)
Payments:
Kingdom supplier.
(7 marks)
(Total = 15 marks)
Question 7
Required:
(e) What is SEPA and what are its benefits? (9 marks)
(f) Briefly explain the EU Regulations defining mandatory deadlines for migration to SEPA.
(6 marks)
(Total = 15 marks)

April, 2016 Examinations
2016/IP/A/04
Thursday, April 14
Morning
conclusions. Every professional advice you may offer should be supported with detailed rational
assumptions.
Examination Hall.
(ix) ONLY approved examination documents and writing materials i.e. ball point pen, pencil, ruler
etc. may be brought in.
- QUESTION 1 IN SECTION A IS COMPULSORY.
- ANY FOUR (4) QUESTIONS IN SECTION B (NOT MORE THAN 2 QUESTIONS FROM
EACH PART OF THE SECTION).
-

Turn Over 2
2016/IP/A/04
SECTION A
This section contains multiple choice questions (MCQ) and short answer questions (SAQ).
Question 1
(i) Under __________ rate system, exchange rate of a country’s currency is determined entirely
by market forces.
(a) Managed floating
(b) Basket floating
(c) Pure floating
(d) Pegging
(ii) One of the following is the best remedy for Balance of Payment crises:
(a) Adjustment through capital movement
(b) Expenditure-Switching Policy
(c) Stimulation of Exports
(d) Adjustment through Exchange rate depreciation
(iii) One of the following is NOT a way by which Foreign Exchange risks can be covered:
(a) Currency options
(b) Matching payments with receipts (netting)
(c) Currency trading
(d) Forward exchange contracts
(iv) The risk that pertains to government failure to perform as contracted in international
transactions is:
(a) Country risk

(b) Political risk
(c) National risk
(d) Sovereign risk
2016/IP/A/04
(v) Pegging the value of the local currency to some other specified currency is known as:
(a) Currency swap
(b) Currency netting
(c) Currency board
(d) Currency pegging
(vi) The Society for Worldwide-Interbank Financial Telecommunication (SWIFT) is a:
(a) Limited Liability Company
(b) Publicly Registered Company
(c) Cooperative
(d) Trust Association
(vii) The type of foreign exchange currency quotation that makes the domestic currency
variable while fixing the foreign currency unit is known as:
(a) European Quotation/Direct
(b) American Quotation/Indirect
(c) Foreign Quotation
(d) International Quotation
(viii) A regional trading block is known as Economic Community when member countries:
(a) Eliminate all barriers to trade among themselves
(b) Follow a common policy in their trade with non-members
(c) Follow common policies in respect of all economic matters

(d) All of the above
(ix) The distinguishing factors of Eurobonds are all but ONE of the following:
(a) They are usually not issued in bearer form
(b) Coupon payments are made yearly
(c) They have a variable rate provision
(d) They carry convertible clause

4
2016/IP/A/04
(x) As per Michael Porter’s Diamond Model for the National Competitive Advantage, which of
the following is NOT the attribute of the Diamond.
(a) Diamond conditions
(b) Facto conditions
(c) Nation’s GDP
(d) Related and supporting industries
(xi) A letter of credit employed where the identity of the original supplier of goods cannot be
disclosed is known as:
(a) Standby Letter of Credit
(b) Transferable Letter of Credit
(c) Transit Letter of Credit
(d) Back to back Letter of Credit
(xii) Incoterms by themselves do not do all BUT one of the following:

(a) Constitute a Contract
(b) Define respective obligation
(c) Define where title transfers
(d) Address the price payable, currency or credit terms
(xiii) A method of financing international trade of capital goods relating to export is known as:
(a) Avalising
(b) Factoring
(c) Forfaiting
(d) Leasing
(xiv) An arm of World Bank that offers various forms of political risk insurance to corporations is
known as ____________________________________________
(xv) Intervention in the foreign exchange market without adjusting for the change in money
supply is known as:
(a) Sterlised intervention
(b) Non-sterlised intervention

(c) Pegged exchange intervention
(d) Managed float

5
2016/IP/A/04
(xvi) Theory specifying that a currency will depreciate against another currency when its
interest rate is higher than that of the other currency is:
(a) Interest Rate Parity Theory
(b) Purchasing Power Parity
(c) International Fisher Effect
(d) Fisher Effect
(xvii) One of the following is NOT an impediment to trade:

(a) Exchange Control Regulation
(b) Import/Export Licencing
(c) Trade Embargoes
(d) Credit Sales
(xviii) Trade Related Investment Measures (TRIMs) do not apply for:

(a) Measures that affect local content requirement
(b) Measures that lead to restrictions in quantities
(c) Measures that limit a company’s foreign investment
(d) Measures that affect a company’s export obligations
(xix) The main disadvantage of Franchising is:

(a) Loss of Control
(b) Loss of Trademark
(c) Loss of Identity
(d) Loss of Market
(xx) Degree to which a firm’s consolidated financial statements are exposed to fluctuations in
exchange rates is known as:
(a) Economic Exposure
(b) Transaction Exposure
(c) Translation Exposure

(d) Currency Exposure
(2 marks each)
(Total = 40 marks)
2016/IP/A/04
SECTION B
PART I
Question 2
As the global economy becomes increasingly competitive, companies are realising that they
must be more flexible with customers. To maintain good sales is being able to offer
international customers better financing terms which is an important part of any sales package.
Since payment from companies in other countries involves elements of effective monitoring
unlike those faced with domestic companies, credit becomes more of an obstacle. With bigger
exports sales, bad debts may occur which could get to crippling level if not well managed. One
of the ways in which this could be avoided is to engage in international factoring.
Required
(a) What is International Factoring? (5 marks)
(b) Identify the three (3) elements of services offered by international factoring companies. (6
marks)
(c) Itemise four major benefits of International Factoring. (4 marks)
(Total = 15 marks)
Question 3
(a) Subject to Exchange Control Regulation in Nigeria, an exporter should invoice his exports in
foreign currency. What are the advantages and disadvantages of this method of invoicing? (10
marks)
(b) What services can banks render to a Nigerian exporter?. (5 marks)
(Total = 15 marks)
Question 4
(a) What are the differences between means of payment and means of settlement in
international finance? (3 marks)
(b) Describe the two (2) major means of interbank accounting settlements in international
finance. (4 marks) 7
2016/IP/A/04
(c) International rules have been established for the uniform interpretation of the principal
delivery terms used in overseas trading contracts, called incoterms. Briefly state the aims and
objectives of these terms. (3 marks)
(d) You are operating from Nigeria and Naira/US$ exchange rate is quoted N52.50/US$.
Interest rate in Nigeria is 21%. While US$ rate is 7%.
Required
(i) Calculate the four months forward margin. (1 mark)
(ii) Determine the expected exchange rate in four months’ time. (2 marks)
(iii) Calculate the one year forward margin and forward rate assuming 360 days in a year. (2
marks)
(Total = 15 marks)
SECTION B
PART II
Question 5
Your customer FABOD Engineering Limited has received an order from a Ghanaian buyer of
Patrol Jeeps to be shipped from England. Details of the order are as follows:
Order from Ghana
Date of receipt - 14th March
Quantity - 50 Patrol Jeeps
Price - US$55,000 per Jeep
CIP West Africa Coast
Delivery - One lot by 4th May
Payment Terms - 90-day Bill of Exchange. Documents
against Acceptance (D/A) payable in Ghana
Order from FABOD Engineering Company Ltd
Quantity - 50 Patrol Jeeps
Price - ₤35,000 per Jeep
CIP European Port
Delivery - One lot by 4th May
Payment terms - Cash against Document - London 8
2016/IP/A/04
On the day the order was received, FABOD Engineering Ltd covered its commitment forward on
the Sterling payable.
Assuming that payment was on 30th April in Pounds Sterling and the payment of US Dollars
received on 30th July.
Using the following rates of exchange, calculate the profit or loss on the transaction for FABOD
Engineering Company Ltd.
Rates: 14th March
Currency Spot Forward
US$ N282.5000-283.7550 1mth 150 - 155k premium
2mths 175 - 180k premium
₤Stg N328.4650-329.1075 1mth 145 - 155k premium
Rates: 30th July
US$ N282.7500-283.9650
Note: Ignore all charges.
(15 marks)
Question 6
(a) Distinguish between financial globalisation and financial integration. (5 marks)
(b) Identify the major flaws affecting financial globalisation. (5 marks)
(c) What are the common benefits of financial globalisation? (5 marks)
(Total = 15 marks)
Question 7
(i) International Organisation of Securities Commission (IOSCO) (5 marks)
(ii) Bank of International Settlements (BIS) (5 marks)
(iii) International Standard Organisation (ISO) (5 marks)
(Total = 15 marks)
2014/IP/A/04
SECTION A
Question 1
(i) In the Heckscher-Ohlin model, the pattern of international trade is determined by:
(a) Difference in factor endowments
(b) Volume of exports including factor costs
(c) Volume of import excluding factor costs
(d) Labour and capital adequacy.
(ii) The Incoterms 2010 reduced the number of terms to:
(a) 10
(b) 11
(c) 12
(d) 13
While the two new terms added are:
(a) CIP and CPT
(b) DAP and DAT
(c) DES and DEO
(d) CFR and CIF.
(iii) From a seller’s perspective, the most basic incoterm transaction is:
(a) Free-on-Board
(b) Ex-works
(c) Cost and Freight
(d) Delivered at terminal.
2014/IP/A/04
(iv) A letter of credit __________________
(a) is only used for domestic shipments
(b) allows a consignee with poor credit to pay by credit
(c) is provided when a transportation vehicle is loaded or unloaded prior to its allotted free time
(d) is a popular payment alternative for international transaction.
(v) Under discounting of book debts, the factor is under obligation to perform the following
financial functions except:
(a) Provision of funds
(b) Risk bearing
(c) Capital management
(d) Credit management.
(vi) A multilateral Financial Institution set up with the general objective of promotion of
international monetary cooperation and growth of world trade is known as
______________________
(vii) The outcome of the United Nations resolution on a “Development Decade” of 1961 was the
creation of:
(a) The WTO
(b) UNCTAD
(c) GATT
(d) All of the above.
(viii) One of the incentives to registered companies in the Nigerian Free Trade Zone is that:
(a) Up to 25% of production may be sold in the customs territory against a valid permit and on
payment of appropriate duties.
(b) Up to 25% of production may be sold by the company without payment of duty.
2014/IP/A/04
(c) Up to 75% foreign ownership equity of the business in the zone is allowable.
(d) Up to 30% of the production may be sold by the company without payment of duty.
(ix) All but one are the many risk bearing services offered by NEXIM.
(a) Export credit guarantee facility
(b) Investment guarantee and investment insurance
(c) Export credit insurance facility
(d) Stocking facility.
(x) The theory of interest rate parity postulates that:
(a) Interest rates should always be equal in two countries.
(b) Spot rate and the future spot rate difference must reflect the interest rate difference
between the two countries in the opposite direction.
(c) Spot rate and the forward exchange rate difference must reflect difference in interest rates
between two countries in the opposite direction.
(d) Spot rate and the forward exchange rate difference must be proportional to the interest
rate applicable in the two countries under consideration.
(xi) The extent to which the value of the firm would be affected by unanticipated changes in
exchange rate is referred to as:
(a) Operating/Economic exposure
(b) Accounting/Translation exposure
(c) Transaction exposure
(d) All of the above.
(xii) KRD International Bank, Lagos has a Pound Sterling account with Midland Bank of UK at
the same time; it maintains a Naira account for the UK bank respectively. To KRD International
Bank, Lagos, those accounts are:
2014/IP/A/04
(a) Nostro: Vostro
(b) Mirror:Vostro
(c) Vostro: Nostro
(d) Nostro: Mirror.
(xiii) In the short run:
(a) Monetary expansion causes the current account balance increase.
(b) Monetary expansion causes the current account balance to decrease and fiscal expansion
the current account balance to decrease.
(c) Monetary expansion causes current account balance to increase and fiscal expansion causes
the current account balance to decrease.
(d) Monetary expansion causes the current account balance to decrease and fiscal expansion
causes the current account balance to increase.
(xiv) The following except one are methods of funds transfer:
(a) SWIFT
(b) Vostro
(c) Internet
(d) Draft.
(xv) All but one are the export incentives available to exporters of non-oil products in Nigeria:
(a) Retention of export proceeds in foreign currency
(b) Capital assets deprivation allowance
(c) Duty draw back scheme
(d) ECOWAS trade liberalization scheme.
(xvi) An arm of Nigerian Export Promotion Council (NEPC) saddled with the task of producing
standard export procedures and documentation in Nigeria is known as:
_______________________________
2014/IP/A/04
(xvii) A loan given to a cash trapped importer using the goods which the importer has
contracted to purchase as security is called:______________________
(a) Stand by loan
(b) Factoring loan
(c) Accommodation loan
(d) Produce loan
(xviii) All but one is not part of the World Bank group which started operation as a single entity
over the years, and has grown in size and complexities is:
(a) International Bank for Reconstruction and Development (IBRD)
(b) International Development Association (IDA)
(c) International Finance Corporation
(d) Multi-lateral Investment Corporation Agency.
(xix) What is the forward margin if N94.5950 was quoted before heavy buying and selling
activities leading to moderate profit level closing the rate at N95.6000 while the operational
cost of 6 months contract closed at 4.41% per year.
(a) N3.1080
(b) N4.1080
(c) N2.1080
(d) N5.1080
(xx) Convert Swiss Franc (SF)600210.96 to Naira directly through the N/SF rate. Today’s
exchange rates are as follows: Bank is selling
US$/163.2100 - 164.0000
US$/SF 92.8900 - 93.9150
(a) SF/N2.7462
(b) SF/N3.7462
(c) SF/N1.7462
(d) SF/N4.7462
2014/IP/A/04
SECTION B
PART 1
Question 2
(a) Give seven (7) points explanation of documentary letter of credit to an exporter. (7
marks)
(b) Give three (3) main disadvantages of a documentary letter of credit from importer’s
point of view. (3 marks)
(c) Give five (5) points on how some of the disadvantages mentioned in (b) above can be
reduced. (5 marks)
Total = (15 marks)
Question 3
(a) In an effort by the Federal Government of Nigeria to encourage export trade in the
country, incentives schemes were introduced. List and explain five (5) of such incentives.
(10 marks)
(b) Itemise the basic export operations involved in pre-shipment export activities. (5
marks)
Total = (15 marks)
Question 4
“Forfaiting should not be seen as being in competition with other export finance scheme, it
is an extra option for exporters’’. Forfaiting by Barclays Bank Plc.
(i) What is forfaiting? (5 marks)
(ii) Describe how it works. (5 marks)
(iii) Give five benefits which an exporter can derive from forfaiting. (5 marks)
Total = (15 marks)
2014/IP/A/04
PART 2
Question 5
Your customer Niger Nigeria Ltd has arranged to buy a consignment of goods from United
States of America and must pay $1,000,000 for them by 8th June. The customer wishes to
cover their foreign exchange risk and so on 8th March they arranged a three months
forward contract with the bank.
On 8th June Niger Ltd tells the bank that due to delay in shipment of the goods payment
has been deferred to 8th July and the bank agree to extend the forward contract by a
month.
The rates of exchange for the dollars are:
8th March
Spot rate 160.1000 - 160.1800
3-months forward 1.8000 - 1.9500 kpm
8th June
Spot 170.1010 - 171.1000
1-month forward 1.2000 - 1.3050 kpm
Required:
(a) Calculate rates applicable to the customer. (5 marks)
(b) Calculate the total amount to be debited into the account of your customer.
(2 marks)
(c) Show the debit entry to the customer’s account if the forward contract had been closed
and a new one month forward contract is arranged at the normal rate on 8th June. (3
marks)
(d) Mention five international financial instruments used in international trading.
(5 marks)
Total = (15 marks)
Question 6
(a) John Mark Nigeria Ltd is into export operations. They have contracted to sell goods to
a Swedish firm at an agreed price of SEK680,000. The terms of settlements being one half
of the sum due payable 3 months after shipment and the other half due 6 months after
shipment. Shipment date is fixed at 1st of May. John Mark Nigeria Limited can choose to:
2014/IP/A/04
(i) Invoice in Swedish Krone without forward cover
or
(ii) Invoicing in Swedish Krone covering the risk forward
or
(iii) Invoice in Swedish Krone then borrowing Swedish Krone which will immediately be
sold for Naira, the SEK borrowing being repaid one half (in three months) and the other
half (six months) after shipment.
You agree with the customer that in the event that they decide to borrow SEK, you would
charge them interest at the rate of 10% p.a. The customer currently has an overdraft
facility on their Naira account, with a current interest payable at 21% p.a.
SEK rates against Naira
Spot 175.7325 - 175.7425
1 month Forward 2.8750 - 2.3750kpm
3 months Forward 2.0000 - 2.6250kpm
6 months Forward 2.7500 - 2.2500kpm
August 1 spot 179.6875 - 179.6950
November 1 spot 179.6750 - 179.6830
Required:
(i) Show by calculations; the comparative cost of each method of invoicing and the Net
Naira proceeds for the customer in each cost.
(10 marks)
(ii) Define international financial markets and list the three of such markets around the
world. (5 marks)
Total = (15 marks)
Question 7
(a) Global Depository Receipt
(b) Bank of International Settlements
(c) Accommodation Finance.

2015/IP/B/04
Thursday, October 15
Morning
Examination Hall.
- QUESTION 1 IN SECTION A (COMPULSORY).
- ANY FOUR (4) QUESTIONS IN SECTION B (NOT MORE THAN 2 QUESTIONS FROM
EACH PART OF THE SECTION).
-
Turn Over 2
2015/IP/B/04
SECTION A
Indicate the correct alphabet as answer to the multiple choice questions in the following:
Question 1
(i) The theory of International Trade which advocates that countries should simultaneously
encourage exports and discourage imports is referred to as:
(a) Free Trade Theory
(b) Theory of absolute advantage
(c) Theory of Heckscher-ohlin model
(d) Mercantilism
(ii) A country with a comparative advantage in producing computer chips
(a) Has a lower opportunity cost of producing computer chips than any other country
(b) Can produce computer chips with fewer resources than any other country
(c) Can achieve better terms of trade in selling computer chips than any other country
(d) Has greater capacity to produce computer chips given its resources than any other
country
(iii) The following are non-conventional Incoterms except:
(a) DDP
(b) DAF
(c) DFS
(d) C&F
(iv) The order of safety of payment terms in International Trade from exporter’s point of
view is:
(a) Open Account, Payment in Advance, Bills for Collection, Documentary letters of Credit
(b) Advance Payment, Documentary letters of Credit, Bills for Collection, Open Account
(c) Documentary letters of Credit, Open Account, Advance Payment
(d) Open Account, Payment in Advance, Documentary letters of Credit, Bills for Collection
3
2015/IP/B/04
(v) Specialised firms that purchase receivables at a discount on either a non-recourse or
recourse basis are referred to as:
(a) Acceptance Houses
(b) Discount Houses
(c) Factors
(d) Merchant Banks
(vi) The method of interbank quotation in the Foreign Exchange Market that expresses the
rate as the foreign currency price of one US Dollar is called:
(a) European terms
(b) American terms
(c) Yequell terms
(d) Indirect quote
(vii) What is the forward margin if N94.5950 was quoted before heavy buying and selling
activities leading to moderate profit level, closing the rate at N95.6000 while the
operational cost of 6-month contract closed at 4.41% per year?
(a) N2.1080
(b) N3.1080
(c) N4.1080
(d) N5.1080
(viii) Tariffs on imported goods result in:
(a) Higher prices for the imported goods
(b) Higher prices for the import-competing goods
(c) Gains by workers of import-competing industries
(ix) The General Agreement on Tariffs and Trade (GATT):

(a) Encourages trade restrictions
(b) Committed GATT members to reduction of protectionism
(c) Established the European common market
(d) Has now eliminated all non-tariff barrier to trade

4
2015/IP/B/04
(x) Which of the following statements is the most accurate?
(a) The purchasing power of any given country will increase in countries where the prices
of non-tradable goods rise.
(b) The purchasing power of any given country will fall in countries where the prices of
non-tradable goods increase.
(c) The purchasing power of any given country will fall in countries where the prices of
non-tradable goods rise.
(d) The purchasing power of any given country will remain constant in countries where the
prices of non-tradable goods rise.
(xi) The multinational agreements making up the WTO agreement consist of:
(a) Agreements on Tariffs and Trade (GATT 1994)
(b) Agreements on Tariffs in Service (GATS)
(c) Agreements on Trade Related Aspects of Intellectual Property Rights (IPR)
(xii) When the overall trade balance is zero:

(a) Merchandise exports equal merchandise imports
(b) The service trade balance must be zero
(c) Exports equal imports
(xiii) An absence of regulatory interference, less stringent disclosure requirements and

favourable tax status are the features of:
(a) The International Capital Markets
(b) The Eurocurrency Market
(c) The Eurobond Market

(xiv) An arm of World Bank Group known as the ‘Soft Loan Window’ is ________:
(a) International Finance Corporation
(b) International Bank for Reconstruction and Development
(c) International Development Association
(d) Multilateral Investment Guarantee Agency

5
2015/IP/B/04
(xv) The potential that the consolidated financial statements of the firms can be affected
by changes in exchange rates is referred to as:
(a) Operating/ Economic Exposure
(b) Accounting/ Translation Exposure
(c) Transactional Exposure
(xvi) A transaction in which two counterparties exchange specific amounts of two different
currencies at the onset and then repay overtime according to agreed contract terms that
reflect interest payments and possibly amortisation of principal is known as:
(a) Currency Netting
(b) Currency Futures
(c) Currency Swap
(d) Currency Options
(xvii) The possibility that one of the parties under a financial contract would default in
meeting its obligations is known as:
(a) Credit Risk
(b) Exchange Rate Risk
(c) Counterparty Risk
(d) Interest Rate Risk
(xviii) The following except one are means of early recognition of discrepancies in
correspondence relationship arrangements:
(a) Tracers on outstanding items
(b) Correct coding and classification
(c) Correction of previous errors

(d) Ensuring accuracy of records
(xix) The following except one are the best ways in which funds can be provided for
monthly expenses by a company for its engineers working on projects abroad:
(a) Foreign Bank Draft
(b) Telegraphic Transfers
(c) Travellers Cheques
(d) Travellers Letter of Credit

6
2015/IP/B/04
(xx) Which of the following is not an incentive available to operators in the Free Trade
Zones in Nigeria?
(a) Up to 50% of the products may be sold in the domestic market
(b) Foreign ownership allowed is not more than 50%
(c) Repatriation of Foreign Capital Investment allowed anytime
(d) No import or export licence is required
(2 marks each)
(Total = 40 marks)
SECTION B
PART I
Question 2
HENRIL Organisation based in Effurum in Delta State has received a confirmed letter of
credit for Angela and Angelus Ltd of London. The face value of the L/C is £75,000.00 with
90 days Draft sight on the issuing bank, CIF London. Although the draft is at 90 days sight,
the advising bank is instructed to pay to the beneficiary on a sight basis.
The Proforma Invoice described the goods as 5000 bags of Talc at £15 each which is
£75,000.00. Partial shipments are prohibited.
Documents required are:
(a) Signed Commercial Invoice in quintuplicate.
(b) 120% all risk insurance policy.
(c) Full set of Clean on Board Bill of Lading marked freight paid.
(d) Certificate of origin, signed by the Delta State Chambers of Commerce in Warri.
(e) Inspection Certificate and IDR.
The L/C expires in UK 31st July 2015 and the latest date of shipment is 1st July 2015. All
documents are to be presented within 30 days after the date of the L/C. The L/C is subject
to Uniform Customs & Practice for Documentary Credits No. 600. On July 16, 2015, Mr.
James Mayaki brings to your attention with the L/C and the accompanying documents
which are:
(i) A draft for £75,000.00 at sight on your bank
(ii) Four signed copies out of five invoices covering a total of 5000 bags of Talc for
£65,000.00
(iii) Statement for £75,000.00

7
2015/IP/B/04
(iv) Certificate of Insurance for £90,000.00
(v) Two out of three original Bills of Lading dated 25th July evidencing carriage of Talc from
Effurum to Lagos on board the vessel “NGOZI” on 30th July marked freight prepaid
(vi) A copy of certificate of origin issued by the Delta State Chamber of Commerce
covering 4000 bags of Talc
Mr. James Mayaki wants to know the position regarding each document and whether they
are in order.
You are required to:
(a) Indicate whether each document is acceptable under the letter of credit (1 mark)
(b) Give reasons for rejecting any document. (5 marks)
(c) What action may be taken in respect of each document? (5 marks)
(d) If the action requested in (c) above is taken, will the document then be in order. If not,
give reasons for your answer. (4 marks) (Total = 15 marks)
Question 3
(a) Enumerate several incentives available to a Nigerian exporter under the relative
exchange control regulations in Nigeria. (5 marks)
(b) At a recent seminar organized by the Nigerian Export Promotions Council (NEPC) at the
Airport Hotels Ikeja, the Chairman of the Plenary Session stressed the functions and the
benefits of NITPRO in International Trade as well as its importance in the development of
the Nigerian economy.
Required:
(i) Definition of NITPRO and its benefits to the Nigerian economy
(5 marks)
(ii) State of the functions of NITPRO (5 marks)
(Total = 15 marks)
Question 4
(a) Explain the following exchange rate determination theories:
(i) International Fisher Effect (2 marks) 8
2015/IP/B/04
(ii) Fisher Effect (2 marks)
(iii) Interest Rate Parity Theory (2 marks)
(b) If the rate of inflation in Germany over the next one year is estimated to move to 4%
and in Nigeria over the same period at 8% while the current spot rate as quoted in the
Financial Times, as an indication of the current market spot rate is €/N200.7250 for export
free Funds.
(i) Determine the expected forward rate on one year forward contracts.
(3 marks)
(ii) Calculate the forward margin for 6 months forward contract. (3 marks)
(iii) What is the expected forward rate for 6 months contract? (3 marks)
(Total = 15 marks)
PART II
Question 5
(a) What is the correspondence/agency relationship arrangement in International Banking?
(3 marks)
(b) Your Head Office maintains various currency accounts with their London
correspondence bank:
(i) If the rate of exchange for 90 days bill on Berne in London is Sfr10.80 and the discount
rate in London is 6% p.a. and 5% p.a. in Berne. Find the rate for 60 days bill for
Sfr113,000 and show what would have been the Sterling value at that rate. (6 marks)
(ii) A customer left with you an M/D bill on Berne for Sfr31,543 dated August 8. On
September 3, he asked for sterling. Sfr is 50-60 in the market. Swiss interest rate for the
type of bill is 30%, foreign stamp is ½ per mille and the bank requires 0.25% as profit.
Detail the routine and state the amount of credit to him. Show the bank’s buying rate for
Swiss francs. (6 marks)
(Total = 15 marks)
Question 6
(a) What are Incoterms as used in International Business? (3 marks)
(b) Briefly explain the following Incoterms as used in International Business.
(i) DAT (2 marks)
(ii) DDP (2 marks) 9
2015/IP/B/04
(c) Yesterday the discount on forward Naira against the US$ narrowed further and for
three months settled at 1.40 cents at 2.3125%. These lower discounts affecting all periods
up to a year, suggested some unwinding of the leads to lags. Explain the above extracts.
(8 marks)
(Total = 15 marks)
Question 7
(a) Write short notes on the following:
(i) Euro note Market (2 marks)
(ii) Eurocurrency Market (2 marks)
(iii) Euro Commercial Paper Market (2 marks)
(iv) Euro Credits (2 marks)
(v) Eurobond Market (2 marks)
(b) Scantex International Plc can borrow $3,000,000.00 at LIBOR plus a lending margin of
0.75 percent per annum on a three-month basis from Barclays Bank in London. Suppose
that the three-month LIBOR is currently 517/32 per cent.
Further suppose that over the second three-month interval, LIBOR falls to 51/8 percent.
How much will Scantex have to pay in interest charges for the six month period for the
Euro dollar loan? (5 marks)
(Total = 15 marks)

2016/CB/B/04
CHARTERED BANKER LEVEL
PRACTICE OF BANKING
Wednesday, October 12
Morning
Examination Hall.
- ANY TWO (2) QUESTIONS IN SECTION A.

- ANY THREE (3) QUESTIONS IN SECTION B.
Turn Over 2
2016/CB/B/04
SECTION A
Question 1
(a) Mr. Fortunate Olajide opened a current account with the Dugbe Branch of Reliable
Bank Plc. your bank. Four (4) years ago, he was granted an overdraft facility (unsecured)
of N5million (five million naira) to enable him expand his production line. The facility was
fully utilized by him. For almost two (2) years now, your bank has made several attempts
to make him repay the outstanding balance of N1.5million (one million, five hundred
thousand naira) but this has proved abortive.
Last year October, Mr. Fortunate Olajide opened another account at Port-Harcourt branch
of Reliable Bank Plc. and did not disclose he was ever a customer of the same bank. He
opened the account as Mr. Fortunate Jide. Early last month, Mr. James a staff of your bank
while on relief duty from Dugbe Branch saw Mr. Fortunate Olajide paying N400,000.00
(four hundred thousand naira) cash into his account which has a credit balance of
N1.8million (one million, eight hundred thousand naira only). He recognised him as the
same person that absconded from Dugbe Branch and quickly checked his mandate. He
found out that it has the same picture, signature but different address. Mr. James reported
the incident to you as the Branch Manager of Dugbe Branch.
Required:
(i) State with reasons what action you would take to safe guard your bank.
(ii) Will your action be different if the overdraft has been written-off as bad debt?
(10 marks)
(b) Peter Taiwo and Peter Kehinde have a joint account with your bank with the mandate
requiring both to sign. Recently, they had a disagreement which they claim has been
resolved. This morning, Kehinde calls to see you, complaining that a cheque for
N10,000.00 signed by both of them has been debited to the account as N10,600.00. Your
record shows that the amount has been paid in cash to Taiwo. After investigating the
issue, you discovered that when the cheque was made out by Taiwo he intentionally
omitted the word “Naira” in the body of the cheque. After the cheque had been signed by
Kehinde, Taiwo added the word “änd six thousand naira” and altered the figures by simply
adding one stroke to the third zero to debit their account. 3
2016/CB/B/04
Kehinde claims that the cheque has been materially altered since he signed it and claims
that you wrongly paid the cheque and as such, you are not entitled to debit their account.
Required:
What is your bank’s position in order to protect your bank?
(10 marks)
(Total = 20 marks)
Question 2
Zembat (Nig) Ltd manufactures electrical cables in their factory located in Gombe and was
willing to supply goods on credit terms to one of its new customers, Mr. Nelly Brown in
Warri who is a customer of First Skylink Bank Plc. He is a well known businessman.
Zembat (Nig) Ltd therefore sent a status enquiry through its banker to First Skylink Bank
Plc for the bank’s opinion about Mr. Nelly Brown. First Skylink Bank Plc gave a favourable
reply to the status enquiry. On the strength of this, Zembat (Nig) Ltd supplied goods on
credit to Mr. Brown worth N7.5million (seven million, five hundred thousand naira).
However, Mr. Brown defaulted in paying for the goods supplied and on investigation,
Zembat (Nig) Ltd discovered that Mr. Brown was owing First Skylink Bank Plc and had
abandoned his account with the bank.
Required:
(a) What is the position of First Skylink Bank Plc and what action could Zembat (Nig) Ltd
possibly take?
(12 marks)
(b) Under what other circumstances can a banker raise status enquiry?
(8 marks)
(Total = 20 marks)
Question 3
(a) A cheque drawn on you by Mrs. Abel is presented through the clearing three (3) days
after her account has been transferred to another branch. Instead of returning it to the
collecting banker, one of our staff merely alters the name of the branch on the cheque and
passes it with your clearing cheques through Head office to the branch to which the
account has been transferred.
In the meanwhile, Mrs. Abel has countermanded payment and so the new branch on
receiving the cheque returns it to the collecting bank marked “order not to pay”. They
refuse to accept the return on the grounds that they 4
2016/CB/B/04
had assumed the cheque to be paid when the normal course of time for presentation
through the clearing had elapsed.
Required:
What is your position? Give reasons for your answers in both cases.
(10 marks)
(b) Akin Jimah a trainee was recently posted to your department. He was surprised to
know that the paying banker may lose its statutory protection under the Bill of Exchange
Act 1990. As his supervisor, explain to him under which circumstances this could happen.
(10 marks)
(Total = 20 marks)
SECTION B
Question 4
Gbolly Plc. manufacturer of glass wares both locally and internationally has maintained
account with the Victoria Island branch of Leadway Bank for over fifteen (15) years. The
company maintains a satisfactory account with the bank and past facilities granted had
been promptly repaid.
The company now approaches the bank for a loan of N10million (ten million naira) to
enable it expand its factory to meet increased demand for its products. As security for the
loan, the company is prepared to execute a debenture in favour of the bank incorporating
a fixed charge over its fixed assets and floating charge over all its current assets. The bank
is prepared to assist the company.
Required:
Explain how the bank should proceed to take the security in order to create an effective
charge. (20 marks)
Question 5
Prince Oriade was a member of the royal family in the South West region. He was wealthy,
educated and very organised. Prince Oriade’s house located in Lekki is valued at
N500million (five hundred million naira only) where he and his wife with three (3) children,
the eldest, Wonuola Oriade, aged 12, lived. Late Prince Oriade left a will that bequeathed
the house to Wonuola absolutely upon the demise of Prince Oriade’s surviving wife, who is
in her early 40s. Prince Oriade’s wife deals in childrens’ wears and needs to expand her
business. She asked your bank for a loan of N40million (forty million naira) using late
Prince Oriade’s house as collateral.
2016/CB/B/04 5
Meanwhile, late Prince Oriade’s lawyer Messrs. Jimi & Jimi is the trustee to the estate.
Required:
(a) State whether Mrs. Oriade’s offer will be acceptable to the bank as security.
(6 marks)
(b) What is the procedure for taking her kind of offer as a bank security?
(10 marks)
(c) State how the bank would achieve a superior right under the circumstances.
(4 marks)
(Total = 20 marks)
Question 6
Golden Bank Plc. has granted an overdraft to Mr. Robato Justus against a guarantee
covering all sums due to bank from time to time with a maximum amount of N1million
(one million naira). The guarantee also contains a clause requiring three (3) months notice
of determination by the guarantor. Today, with Mr. Justus account having N150,000 (one
hundred and fifty thousand naira) credit, the guarantor advises the bank of his intention to
terminate his liability under the guarantee next month.
Required:
What is the bank’s position and how should the bank reply the guarantor? (20 marks)
Question 7
(a) Jolly (Nig) Ltd, a private company has been your customer for 12 years. The company
undertakes plumbing and electrical installations. Its previous borrowings were secured by
the personal guarantees of its two directors. The company has just won a contract for the
plumbing work of the new Head Office of an insurance company in Lagos. The directors
have approached you for a further loan of N15million (fifteen million naira) to enable the
company start work on the new contract immediately. To secure the new borrowing, they
have offered to assign to your bank the balance due to the company on the plumbing work
done on the housing estate of Chief Ayoolu, one of your worthy customers well known for
meeting his obligations. You made enquiry from Chief Ayoolu with the consent of the
directors and he confirmed that work is near completion and the company is entitled to
substantial sum on the project. You are prepared to help the company.
Required:
Explain fully the procedure you will take to ensure your bank has good security. (10
marks)
< 6
2016/CB/B/04
(b) Your customer, Ebele Oni, was surprised on your choice of security to be accepted for
the overdraft facility your bank recently granted him. Ebele Oni has offered a charge of
either his life endowment policy taken out 7years ago with a surrender value of N2million
(two million naira) or 50,000 shares, he own as director of Morgans Publishers Ltd which is
valued at N5million (five million naira). Either of the securities was offered by him to
secure an overdraft of N1million (one million naira) granted to him.
Required:
Explain to Ebele Oni the considerations that affected your decision as the credit officer of
your bank. (10 marks)
(Total = 20 marks)
Question 8
(a) What is Asset Securitisation? (5 marks)
(b) Banks usually structure asset backed securities using “grantor trusts”, “owner trusts” or
“revolving asset trusts” each of which customarily issues different types of securities
Required:
Explain how the three (3) different trusts can be used to create securitisation vehicles. (15
marks)
(Total = 20 marks)

2015/CB/B/04
PRACTICE OF BANKING
Morning
Examination Hall.

Turn Over 2
2015/CB/B/04
SECTION A
Question 1
(a) As a result of the deplorable state of roads in Obalefum Community, some eminent
gentlemen of the area have decided to incorporate a small limited liability company to
undertake the production of asphalt which would be sold to the state government and
local government councils at affordable price. The Memorandum and Articles of Association
have been prepared and signed as required by law but the company is yet to be
registered.
Enthusiastic shareholders have contributed N800,000.00 which was taken to the bank with
the Memorandum and Articles of Association for the purpose of opening a current account
in the name of the company. The bank’s current account officer refused to open the
account. Whilst the shareholders were in the banking hall, armed robbers struck and
carted the money away together with other valuables in the banking hall. The company’s
shareholders initiated a legal action against the bank for a refund of the money stolen.
Required:
Advance reasons to justify the bank official’s action.
(5 marks)
(b) State, with reasons, the action you, as the bank official, would have taken in the
circumstance. (5 marks)
(c) At what point will a bank be liable for its customer’s money stolen in the bank’s
premises? (5 marks)
(d) What defence (if any) can the bank put-up? (5 marks)
(Total = 20 marks)
Question 2
(i) Chief Oluomo of Ajaguna land is the proprietor of Oluomo International College at
Ajaguna Community. He has maintained his school account with your bank since four
years ago. Chief Oluomo wanted to travel to Kenya for twelve months for his Master
Degree Programme and during his absence, he wants his first son, Bamiduro Oluomo to
take over the management of the school and its bank account. Chief Oluomo is the only
signatory to the school account and he will be away for twelve months.
3
2015/CB/B/04
Required:
(a)(i) Advise Chief Oluomo as regards the arrangement he should make with the bank and
its benefits. (4 marks)
(ii) State the precautions the bank should take to protect itself from being negligent under
this arrangement. (6 marks)
(b) Before the end of the twelve months and about the time he was preparing for his
return home, Chief Oluomo had a cardiac arrest and died intestate in Kenya.
Give full details of the steps which his son, Bamiduro Oluomo should take in order to
continue with the management of the school and the conduct of the account.
(10 marks) (Total = 20 marks)
Question 3
Chukwu and Emaka are partners in business dealing in hand woven fabrics in Ajaokuta. A
current account in the partnership’s name was opened in your bank and the account has
been well-conducted. The furniture being used in their office has been obtained on credit
by Chukwu from his friend at a cost of N400,000.00. Last month, Chukwu quietly retired
from the partnership business and he only informed Emaka of his action. After Chukwu’s
retirement, the supplier of the fabrics from Ede in Osun State continued to supply goods
worth N1.2 million to the firm. Chukwu died last week at the age of 80 years when he was
owing his uncle, Dickson the sum of N200,000.00 and the firm’s bank account was
overdrawn to the tune of N1.8 million. When the bank was advised of Chukwu’s death, the
partnership account was ruled off.
Required:
(a) What is the significance of ruling off of the firm’s account? (5 marks)
(b) Emaka refused to pay for the furniture supplied by Chukwu’s friend claiming that he
was not aware that Chukwu obtained it on credit. What advice will you give to Emaka? `
(5 marks) 4
2015/CB/B/04
(c) The personal representatives of Chukwu refused to accept liability for N1.2 million
claiming that it was incurred after Chukwu’s retirement. Is their decision in order? (5
marks)
(d) Chukwu’s personal estate was valued at N180,000.00. How much will Chukwu’s
personal representatives contribute to the payment of the overdraft of N1.8 million owed
by the firm? (5 marks)
(Total = 20 marks)
SECTION B
Question 4
Mallam Dongoyaro, a valued customer of your branch at Lagos called to inform you that
he had been awarded a contract for the supply of building paints worth N800,000.00 and
would like to know if you would agree to extend an overdraft facility to him in the sum of
N600,000.00 for six months. You are favourably disposed to his request provided he is
able to make suitable and acceptable security arrangement. He informed you that he had
a fixed deposit account of N1.0 million at your branch at Osogbo and this will mature in
eight months time. He is willing to use the balance in his fixed deposit account as security
for the overdraft facility, if approved.
Required:
(a) Should you agree to the security arrangement, what steps will you take to protect the
interest of your branch? (12 marks)
(b) Mention three (3) merits and one (1) demerit of this type of security arrangement to
the bank. (8 marks)
(Total = 20 marks)
Question 5
You are the Head of Security Department of your branch. Miss Jayeoba Helen, a graduate
trainee who was recently employed by your bank comes to your department this afternoon
and asks to be educated on the following issues relating to Goods and Produce as security
for the bank’s loans and advances: 5
2015/CB/B/04
(a) What are the things to be considered on the Goods/Produce and the
borrower/customer as precautions for the bank when taking Goods and Produce as
security for bank loans? (10 marks)
(b) State the procedures to be followed in order to safeguard the bank’s interest at all
times. (10 marks)
(Total = 20 marks)
Question 6
Mr. Afolabi Haruna is a young entrepreneur who has been in account relationship with
your bank, Much Money Bank Plc in the last seven years. Three years ago, he took a loan
of N650,000 from your bank and offered as security, a legal assignment on a life
endowment policy on his life. The policy which now has a surrender value of N700,000.00
is still four years to maturity. His loan account has been dormant with outstanding balance
of N612,305.25 and several demands have been made without response. The Head Office
of your bank had written you as the branch manager with the instruction to enforce your
security without further delay.
Required:
(a) What are the options available to you under this circumstance?
(4 marks)
(b) Enumerate the procedures for realising this security under each option mentioned in
(a) above. (16 marks) (Total = 20 marks)
Question 7
Togbe Limited is a manufacturing company which deals in production of industrial soap
with good business records. The company has banked with you for 20 years and has never
borrowed. Mr. Easyway Alex, the Finance and Administrative Director, approached you for
an overdraft facility of N800,000.00 for a period of six months. He informed you that the
company’s directors at its last meeting held just a week ago, had agreed to this request
and that a sister company, Sunrise Ltd located in the same street, although not under the
same ownership, that deals in palm oil, has consented to guarantee the overdraft request
of Togbe Ltd. With this security arrangement, you are ready to accept the proposal.
Required:
Detail the steps you would take to ensure that bank interest is adequately protected.
(20 marks) 6
2015/CB/B/04
Question 8
(a) What is securitization? List three major benefits of assets secrutization from the
perspective of credit originators. (10 marks)
(b) The primary difference between whole loan sales or participations and securitized
credit pools is the structuring process.
Required:
Enumerate four major stages of the structuring process in asset securitization.
(4 marks)
(c) Banks usually structure asset-backed securities using “grantor trusts”, ‘’owner trusts’’ or
other ‘’revolving asset trusts’’.
Required:
Explain the following terms
(i) Grantor trusts (2 marks)
(ii) Owner trusts (2 marks)
(iii) Revolving asset trust. (2 marks)
(Total = 20 marks)

2014/CB/A/04
PRACTICE OF BANKING
Wednesday, April 09
Morning
Examination Hall.

Turn Over
2014/CB/A/04
SECTION A
Question 1
Mr. David drew a cheque in the sum of N65,000 against Express Bank Plc in favour of
Malam Aigo Sadiq as a birthday gift. The cheque was stolen by Johnson Crook, who used
the cheque on forged endorsement to buy a handset from Madam Do-good. Madam Do-
good in turn endorsed the cheque to her landlord in settlement of her shop’s rent. Her
landlord, Chief Olowolu paid the cheque into his account for clearing. On presentation of
the cheque to the payee bank, it was returned unpaid, the cheque having been
countermanded by the drawee.
Required:
(i) Justify the action of Express Bank Plc in returning the cheque unpaid.
(ii) What rights have Chief Olowolu if the cheque is negotiable and if the cheque was
crossed “not negotiable”.
(iii) How would the cheque have been crossed specially? What would have been the effect
of such crossing?
(20 marks)
Question 2
Chief and Mrs. Alotin Davies maintain a joint account with our branch with the mandate of
“either to sign”. The account has been satisfactorily operated for more than 15 years and
has always been in credit balance.
Today, you heard in the news, the sudden death of Chief Alotin Davies. Your enquiry from
Mrs. Davies confirmed the death of her husband. Your examination of the joint account
reveals a N20 million credit, out of which you have pending on your desk, for attention,
the following cheque from clearings:
(i) A cheque is the sum of N750,000 in favour of Miss Dupe Adamu signed by Chief Alotin
Davies.
(ii) A cheque in the sum of N1m in favour of Mrs. Kike Lawson, mother of Mrs. Alotin
Davies signed by her.
(iii) A cheque in the sum of N2.5m in favour of a land speculator signed by Chief and Mrs.
Alotin Davies.
2014/CB/A/04
Required:
(a) How would you treat these cheques stating your reasons?
(b) How would you treat future cheques signed by Mrs. Alotin Davies?
(20 marks)
Question 3
A young man, Buba Okoro, approached your branch about three months ago with cash
sum of N450,000 to open a personal current amount. He completed all account opening
formalities including two references which were found satisfactory by an amiable ready-to-
learn Industrial Training student attaché in your branch. The two referees replied promptly
and satisfactorily too. Hence the opening of the account and issuing of twenty five leaves
cheque book to him.
Within two weeks, he had withdrawn N430,000 with various cheques. Last month he came
in to lodge into his account a cheque in the sum of N2 million drawn on Tiwantiwa Bank
Plc. On enquiry, he told the cashier that the cheque was the proceeds of a landed property
he sold on behalf of his client. A few days after, the cheque had cleared into his account,
he drew a cheque for N1.5 million in favour of one Mr. J. Ojopagogo who he claimed to be
the owner of the landed property, his principal. He has also drawn various cheques in the
last one week, which were promptly paid by you branch against the account.
This morning, a letter was received from Chief Ala Chambers, alleging your customer of
impersonating his client, Mr. Buba Fasasi and defrauding him a sum of N2 million. It was
further revealed that the real name of your customer is Abba Fasasi. Your bank is accused
of aiding and abetting as well as negligence and conversion. The Law Chambers is
demanding for a refund of the proceeds of the cheque with the accruing interest to be
paid to his client or the bank shall face legal action.
Your further investigation revealed that the two referees were fictitious and were given by
the same customer purporting them to have been given by the named referees.
Required:
(a) What is your bank’s position? (20 marks)
2014/CB/A/04
SECTION B
Question 4
(a) What is puisne mortgage and what are the precautions to be taken by bankers when
accepting it as security for bank lending?
(b) Explain succinctly what you understand by the following clauses in bank guarantee
deed:
(i) Whole debt clause
(ii) Continuing guarantee clause
(iii) Set-off clause
(c) What are the peculiarities of guarantees given by a woman to support the borrowing
by her husband; and a guarantee given by a limited liability company?
(20 marks)
Question 5
(a) Differentiate between a fixed Debenture Deed and a floating Debenture Deed.
(b) In drafting a debenture deed, a lending bank must exercise reasonable care to tie all
loose ends. Identify and explain five major and important clauses in the debenture deed of
a typical bank.
(c) Explain briefly, the process of obtaining and perfecting a debenture as security against
lending to a limited liability company.
(20 marks)
Question 6
G. P. Associated Ltd is a business account owned by Papalolo and another. The company
has two Directors who are operating the account on either to sign mandate. The account
has been operated hitch-free for the past 5 years.
The company is seeking for a credit facility in the sum of N750,000 as working capital from
your bank for a period of nine months. Papalolo, one of the directors is prepared to give a
legal assignment of his life assurance policy as security for the facility.
2014/CB/A/04
Required:
Set out, in detail, how you will proceed to take perfect security as proposed for the credit
facility in this respect. (20 marks)
Question 7
Mrs. Funmi Affiong, whose office is a stone-throw to your office is a major distributor of
wine. Two years ago, your bank approved a sum of N200,200 as overdraft to support her
in her wine distribution business. The facility was secured with the personal guarantee of
her husband, Chief Affiong, supported by his share certificates in a blue-chip company.
The shares then were worth about N1.5 million.
You have recently observed that the overdraft which now stands at N300,000 is becoming
sticky.
Today, her husband called to see you and informed you of his intention to pay off the
overdraft. In fact, he issued his personal cheque in the sum of N400,000 to cover the
entire indebtedness of his lovely wife. The cheque on presentation was cleared and the
account swang into credit.
Chief Affiong has requested that his guarantee be terminated forthwith and his supporting
shares be returned to him immediately.
Required:
(i) How would you treat the request of Chief Affiong? Give reasons for your answer.
(iii) Would your answer have been different if the credit facility has been a term loan?
(20 marks)
Question 8
(a) Sola Uche works with a small manufacturing company in Awka. He maintains a salary
account with your branch. He works into your office today with a written request for a 90-
day credit facility of N600,000 and offers his saloon car as security. He promises to pay the
loan en-bloc from his housing allowance of N1million which will hit his account within the
next 10 weeks. He does not want his employers to know of this transaction.
You are inclined to assist and accept the proposed security.
2014/CB/A/04
Required:
What steps would you take to ensure that your bank position is adequately protected? (10
marks)
(b) (i) What are the differences between a performance bond and a Customs and Excise
bond? (5 marks)
(ii) What are the factors to be considered by a lending banker in issuing performance bond
and Customs and Excise bond? (5 marks)
Total = (20 marks)

2017/CB/A/04
PRACTICE OF BANKING
Wednesday, April 5
Morning

Examination Hall.

Turn Over 2
2017/CB/A/04
SECTION A
Question 1
(a) Mr. Dowell Chukuemeka has operated an account with your bank satisfactorily for over
7 years. Some days ago he received a short message service (SMS) from an unknown
person who claimed to be a staff of Central Bank of Nigeria (CBN) requested him to send
details of his account (including BVN and PIN numbers) in order not to deactivate his ATM
card. Mr. Chukuemeke voluntarily gave the information without enquiring from his banker.
Few hours later, Mr. Chukuemeka received a debit alert of N250,000. The next morning he
came to your bank to demand for explanation while his account has been debited. After
making enquires, it was discovered that Mr. Chukuemeka has been defrauded. He then
threatened to take legal action against the bank for the refund of his money.
What will be your banks position if legal action is taken by Mr. Chukuemeka?
(10 marks)
(b) You have for the past few years transferred, under standing order, the sum of N15,000
a month from the account of your customer, Mr. Agbabiaka to his wife’s account at
another branch of your bank. Just over four months ago, he wrote advising you that that
they had separated and instructing you to cease making these payments. Through a
clerical error your branch continued to make the payments to the debit of his account. His
statement has been sent to him each month, and he calls to see you today to complain
that the last four payments totaling N60,000 should not have been made.
Discuss the bank’s position vis-a-vis both Mr. Agbabiaka and his wife, Mrs. Agbabiaka. (10
marks)
(Total = 20 marks)
Question 2
(a) Chief Alowolodu Abas your valued customer for 12 years is a young professional whose
business involves a lot of travelling. It is his practice to make out cheques for the
maintenance of his family in the name of his Wife Binta Alowolodu whenever he travels out
of town on business.
A week ago, Chief Alowolodu Abas called on you to say he was going on business trip for
about five weeks.
This morning, Mrs. Alowolodu Binta who is personally known to you present a cheque for
N75,000 issued by her husband in her favour for cashment. The Teller discovered that the
cheque is postdated – 15/12/2017 and returned it with the answer ‘Effect Post-Dated’. 3
2017/CB/A/04
Mrs. Alowolodu Binta has come to plead with you as the Branch Manager for help in
paying the cheque as the proceed is required for urgent family needs. You were reliably
informed that their only son is critically ill and need medication.
How would you treat this case? Give reasons for your answer.
(10 marks)
(b) Akintoye Olooa and Kosoko Dayo are executors of Chief Adele Tomiwa, deceased and
have had the executor’s account with your bank since last year. The mandate is for either
to sign but most of your dealings have been with Akintoye Olooa, who now calls to tell you
that he is going abroad for three years and that all future transactions will be carried out
by Kosoko Dayo. As this will involve the issue of cheques once a quarter to the
beneficiaries under the will of Chief Adele’s estate and the amount has been invested, he
assumes that there will be no difficulty but would like any future correspondence to be
sent to Kosoko to handle.
What advice would you give to Akintoye Olooa and Kosoko Dayo? (10 marks)
(Total = 20 marks)
Question 3
Chief Owonifari Dolapo issued a cheque for N75,000 (Seventy-five Thousand Naira Only)
drawn on your bank in favour of Mr. Job Godwin for goods supplied to him. Mr. Job
Godwin endorsed the cheque to Miss. Ojuoge Orekelewa as her birthday present. The
cheque was lost by Miss Ojuoge Orekelewa and found by Mrs. Goodluck Oriyomi who was
able to cash the cheque at your bank.
Required:
(a) Who are the holders of this cheque? (4 marks)
(b) Mention parties to be holders for value. (6 marks)
(c) State whether Mrs. Goodluck Oriyomi and your bank can be holder in due course or not
and give reasons. (10 marks)
(Total = 20 marks)
SECTION B
Question 4
Your customer, Chief Molero Bestman, is an importer on a large scale and seeks assistance
from your bank in building up stock of goods in order to meet his customer’s demand
during the forthcoming Christmas festivity. Your bank is entirely happy to assist but the
only security available is the stock of goods which are to be held to Chief Molero Bestman’s
order in warehouses.
How could you obtain a suitable security and, as it will be necessary for goods to be
released to purchasers who require between one and three months to pay?
How would you safeguard your bank’s position at all times? (20 marks) 4
2017/CB/A/04
Question 5
In an effort to improve the economy and increase food production in the country, the
Federal Ministry of Agriculture in collaboration with the Country Director of United States
Agricultural and Industrial Development (USAID) have identified major problems faced by
the Nigerian farmers as lack of access to improved seedlings, inadequate use of modern
agricultural equipments and lack of financial support through agriculture loans or finances
by Nigerian banks.
As to this, a Conference has been organised where all stakeholders including your bank
are billed to attend. The theme of the Conference is Agricultural Development through
Agriculture Credit Guarantee Scheme Fund (ACGSF).
You are to prepare a brief note to be delivered by you on the following:
(a) What is Agriculture Credit Guarantee Scheme Fund (ACGSF) all about and its
objectives? (9 marks)
(b) What is the process involved in obtaining this ACGSF by farmers? (6 marks)
(c) Which agricultural activities qualify a farmer for guarantee under ACGSF and the
amount that a beneficiary can enjoy? (5 marks)
(Total = 20 marks)
Question 6
Your customer, Bestway Product Limited, has been in banking relationship with you for
over 12 years. The company’s Director of Finance and Administration calls on you to
request for an overdraft facility of N4.5 million. He informed you that the company’s
Directors at their last meeting held yesterday, had agreed to this request and have also
agreed to give the bank, as security, a mortgage over the company’s factory premises,
which are freehold and in an area not subject to compulsory registration at the Land
Registry.
Required:
Set out how you would complete the taking of the security and safeguard the bank’s
position.
(20 marks)
Question 7
Ayelabola Microfinance Bank Limited opened its correspondent account with your bank
since 5 years ago. The account has been operated satisfactorily with good turnover. Today
the Microfinance Bank MD called on you to request for an overdraft facility of N15 million
for a period of six month. He told you that the decision on this request was taken at the
bank’s Board of Directors meeting held last week and they have no security other than a
landed property of their customer, Chief Ologundudu Agbeja, valued at N42 million. The C
of O of the said land is already used as legal mortgage to secure an overdraft facility
obtained from Ayelabola 5
2017/CB/A/04
Microfinance bank with present outstanding balance of N18 million. The overdraft will
however, expire in ten months time.
Your bank had agreed to assist and accept the security proposal.
Required:
(a) Detail the procedures to be taken in order to safeguard your bank’s position.
(16 marks)
(b) What could be the possible limitations of this type of security? (4 marks)
(Total = 20 marks)
Question 8
Mention four (4) impacts/benefits of Securitization on bank issuers. (8 marks)
(a) The implications of Securitization for liquidity should be factored into a bank’s day-to-
day liquidity management and its contingency planning for liquidity.
Required:
Explain, in details, how a bank would ensure proper liquidity management and its
contingency planning for liquidity? (12 marks)
(Total = 20 marks)

2016/CB/A/04
PRACTICE OF BANKING
Wednesday, April 13
Morning
Examination Hall.

Turn Over 2
2016/CB/A/04
SECTION A
Question 1
(a) Mr. Lucky James and Mr. Goodluck John have been friends for more than three
decades. Five years ago, the two friends deposited a locked box marked “Content
Unknown” in their joint names for safe custody. This morning you read in one of the
dailies about the death of Mr. Lucky James in an accident on his way back from a business
trip. Soon after, Mr. Goodluck John calls to see you bringing along with him the death
certificate of Mr. Lucky James and the bank’s receipt asking that the box be released to
him.
Required:
Explain in detail the steps the bank should take to resolve the customer’s request. (10
marks)
(b) Mrs. Ajinomoto, 85 years old, is a retired Principal of Ayenle Girls College (a private
college) at Ayenle. She has been a customer of your Bank at Ayenle, a small village with a
population of 5000 adults, for several years.
To cater for Mrs. Ajinomoto, she employed twenty years ago, a middle-aged Nurse, Mrs.
Ade-David.
Over several years the withdrawals by cheques payable to Mrs. Ade-David for Mrs.
Ajinomoto’s maintenance have been relatively stable. However, recently, the frequency
has increased. Alerted by this trend, the branch Manager invited Mrs. Ajinomoto to the
bank to call her attention to this fact. After going through her statements she agreed with
the bank Manager she would reduce the frequency of withdrawals. In the event nothing
changed. This led the branch Manager to call the attention of Mr. Ajinomoto, who was
granted a power of Attorney by his mother three (3) years ago to the development.
After investigation, it turned out that Mrs. Ade-David had been forging Mrs. Ajinomoto’s
signatures to make additional withdrawals from her account. The excess withdrawals had
accumulated to N300,000.00. The bank Manager is now faced with a claim for this excess
amount.
Required:
What is the position of your bank as well as the position of Mrs. Ajinomoto?
(10 marks)
2016/CB/A/04
Question 2
Chief Ututu Igwe is a long standing customer who is very popular in the branch. Over
time, he developed the habit of giving his sales proceeds to any teller to count and credit
his account while he went away to attend to his business.
This morning, he stormed into the branch to complain that N650,000 cash he paid in last
week Thursday did not reflect in his account hence, the ATM rejected his withdrawal on
Sunday, when he should have travelled to take advantage of cheap products. He accused
one of the tellers of collecting his bag filled with cash for counting and lodgement. The
teller denied ever receiving the bag.
Required:
How will you as the Operations Manager, address this problem while protecting the bank?
(20 marks)
Question 3
Mr. Aminu Sahara maintains a current account with your bank Open Door Bank Ltd., with a
credit balance of N250,000 (two hundred and fifty thousand naira). Three weeks ago he
withdrew N20,000 (twenty thousand naira) with his ATM card. He called at your branch
this morning to check his balance and it was N30,000 (thirty thousand naira) credit. He
was surprised and immediately lodged his complains to the manager. The manager
promised to look into the account and ascertain what was wrong. He withdrew N30,000
(thirty thousand naira) and left the bank.
The following morning before the error was corrected and before the manager got back to
him, he drew a cheque for N100,000 (one hundred thousand naira) in favour of his brother
Mr. Joe Sahara. The cheque was dishonoured. Mr. Aminu Sahara was not happy with the
development and instructed his Lawyer to write to the bank claiming N5 million (five
million naira) as damages for wrongfully dishonouring his cheque.
Required:
Explain the bank’s position and what could be the result of the customer’s action if he goes
to Court?
(20 marks) 4
2016/CB/A/04
SECTION B
Question 4
(a) Banks exercise maximum care in drafting debentures for obvious reasons. What are
the obvious reasons?
(8 marks)
(b) The General Manager Operations of your bank will be retiring from service in a few
months time. He has identified a property he would like to buy in Lekki as his retirement
house. He applied to the bank for a loan of N25 million to be secured on his reversionary
interest.
(i) What is reversionary interest?

(ii) How would the bank tie up this security, if it decides to lend the money?
(12 months)
(Total = 20 marks)
Question 5
Good Favour Bank Plc has appointed Ade and Ade Partners (Insolvency Practitioners) as
Receiver/Manager to undertake the management of Irewole Ltd. for failure to settle a
credit facility granted to the company. The company produces roofing sheets in Giko State
and has been in business for the past 10 years.
Currently, the company is experiencing serious financial crisis due to the down turn in the
economy. The outstanding facility is secured by a fixed and floating debenture of N50
million (fifty million naira).
Required:
Explain the actions the Receiver/Manager will take in protecting your bank against any
losses and the company from being liquidated.
(20 marks)
Question 6
Holly Ltd., a valued customer of your branch, has been in account relationship with your
Badun branch for over eight years. The account has been well managed with high turnover
from inception. The directors of the company, Mr. Ilesanmi Joy and Mr. Perfect Love,
approached your bank for a credit facility of N2.5 million (two million, five hundred
thousand naira) to support their recent expansion.
Your bank is favourably disposed to their request, if, the directors are able to provide
acceptable and suitable security. Mr. Perfect Love informed you of the arrangement to
offer his Duplex at Ijebu-Ode as security. The house is valued at N5.5 million (five million,
five hundred thousand naira) and he lives there with members of his family. You have
decided to take a legal mortgage on the house. 5
2016/CB/A/04
Required:
(i) As the Credit Manager of your branch, how do you intend to perfect the security? (12
marks)
(ii) If the company defaults, how can the bank realize the asset and what are the
obstacles, if any?
(8 marks)
(Total = 20 marks)
Question 7
(a) Mr. Jack Rafta, a successful businessman, has been your customer for 10 years. He
has maintained a satisfactory account with your bank over the years. Recently, the change
in weather necessitated an increase in the production of the various flavours of juice
produced by his company, Abor Drinks Ltd. He approached your bank for a loan of N2
million (two million naira) offering his life insurance policy valued at N4 million (four million
naira) as security.
Required:
(i) What precaution must you take in accepting the life insurance policy?
(6 marks)
(ii) Detail the procedure for effecting a legal assignment over the life insurance policy. (6
marks)
<
(b) Chief Goddey is well known to the bank as a contractor of long standing. He is the
Managing Director of Usefulness Construction Company Ltd. and one of the major road
contractors with the Federal Government. The bank has always provided him credit
facilities on the strength of assignment of the contract proceeds.
Required:
What are the dangers in accepting assignment of contract proceeds as security for a credit
facility especially as the Client is Federal Government? (8 marks)
(Total = 20 marks)
Question 8
(a) Define Securitization as a funding tool? (8 marks)
(b) Explain the benefits of asset Securitization to each of the major parties listed below:
(i) Originator (4 marks)

(ii) Investors (4 marks)
(iii) Borrowers (4 marks) (Total = 20 marks)
2017/CB/B/04
PRACTICE OF BANKING
Morning
Examination Hall.

Turn Over
2017/CB/B/04
SECTION A
Question 1
Two weeks ago, Mrs. Agnes Pelemo instructed you to stop payment of her cheque for
N75,750 made payable to Zamaya Alli. The cheque which was endorsed to Chief
Egunjobi Judas is presented to your bank through the clearing system and was
subsequently returned with the answer “order not to pay”.
Today, Mrs Agnes Pelemo calls you that she has received a letter from a firm of solicitors
saying that their client Chief Egunjobi Judas is a holder in due course and they seek
reimbursement on his behalf. Mrs. Agness Pelemo says that she does not understand
what the solicitors’ letter means.
Required:
What will be your reply to Mrs. Agnes Pelemo? Give reasons for your answers. (20
marks)
Question 2
(a) Your valued customer, Chief Mayegun Ogunde has been in account relationship
with your bank for the past 5 years. His account has been well operated with an
average credit balance of N10.50million monthly. At the point of opening this
account, Chief Mayegun Ogunde had given a specific instruction to the bank not
to give any information on his account to a third party without his consent.
You read in the Punch Newspaper of yesterday that your customer, Chief
Mayegun Ogunde has been arrested by a police team of Alagbon, Lagos and he
is being held on charges of A.T.M. fraud amounting to N5.5million.
Today, a police inspector called and brought a court order duly signed by a Lagos
High Court Judge requesting for copies of Chief Mayegun Ogunde’s Statement of
account for the past two years to help in the Court processing. He confidently told
you that the charges are very serious.
Required:
How will you deal with the situation? (14

marks)
(b) Ifeoma Obelawo, a young and dynamic entrepreneur calls to tell you that she has
been appointed Treasurer of the newly formed Dynamic Youth Social Club,
Akonwonjo, Lagos and she wishes to open a current account for the club.
Required:
Describe the action you would take and the information you would require in
opening the account. (6
marks)
(Total = 20
marks)
2017/CB/B/04
Question 3
Chief Chukwu Adamu, a successful businessman has been in account relationship with
your bank, MERRY BANK PLC, Ojota Lagos Branch for the past four years. Today, with
N5,275.00 credit in his favour, Chief Chukwu Adamu pays in the underlisted MICR
Cheques of different banks into this account and asked if he can withdraw the sum of
N75,500 immediately from the proceeds of the cheques paid in since he beliefs the
clearing system has changed.
The cheques paid in and presented for clearing are:

(i) Happy Bank Plc, Victoria Island, Lagos cheque for N45,240.75
(ii) Success Bank Plc, Sokoto Branch cheque for N1.2million
(iii) Merry Bank Plc, Ojota Lagos Branch cheque for N10,750.00
(iv) Up-down Bank Plc, Awka Branch for N120,000.00
(v) Glory Bank Plc, Otuoke Branch for N2.5million.
The Clearing Officer recently posted to the bank’s Clearing Department could not explain
matters to Chief Chukwu Adamu and has now come to you for briefing on the following:
(a) The meaning of MICR cheque and Clearing System

(b) Objectives of introducing MICR cheque in the clearing system
(c) Present clearing system/method and how it works
(d) The actual period each cheque will be cleared to the credit of Chief Chukwu Adamu’s
account.
Required:
How would you respond to each of the above enquiries? (20

marks)
SECTION B
Question 4
You are worried that your customer Glorious Investment Plc, wholesaler and Importer
of Woollens and Cottons from abroad may be overtrading. However, since they have
recently acquired good contracts to supply two major retail outlets, Alpha Shops Limited
and Beta Wears Limited, you are prepared to increase their overdraft provided they give
you a charge over each contract. You already hold the company’s directors’ joint and
several unlimited guarantees. Payment will be made to the overseas vendors on arrival
of the goods in the country and receipts from the contractees under the revolving
contracts will be sixty (60) days after delivery.
2017/CB/B/04
Required
(a) State how the security would be perfected and controlled to safeguard the
interest of the bank. (12 marks)
(b) What are the benefits of this type of security? (8 marks)
(Total = 20 marks)
Question 5
Your customer, Mallam Aboki Sambogeri, a middle aged man borrowed N250,000 on his
current account for urgent personal expenses which has been due for payment. As
security, he offered your bank a legal mortgage on his 600,000 ordinary shares of N1.00
each in Joyful Company Plc.
Today, you noticed in the press that Joyful Company Plc has been the subject of an offer
from Happiness Continental Plc for all its ordinary shares capital to become a mega
company. The term of offer comprised of a payment of cash dividend of 50 Kobo per
share and the issue of one (1) new ordinary share in Happiness Continental Plc for every
five (5) ordinary shares in Joyful Company Plc. Mallam Aboki however confirmed the
development to you.
Required:
(a) Describe, in detail, the sequence of events in reacting to this in your capacity as a
secured lender. (12
marks)
(b) Assuming that Mallam Aboki Sambogeri accepts the offer or the offer becomes
unconditional, what should you do to protect the bank’s and Mallam Aboki’s
interests now and in the future.
(8 marks)
(Total = 20 marks)
Question 6
Tiwantiwa Microfinance Bank (MFB) Ltd has been in account with your bank – Peace
Bank Plc for the past three (3) years with satisfactory level of operations. Tiwantiwa
MFB Ltd has its current and deposit accounts with your bank. The account is always in
credit, while the deposit account, fixed for six months ago, stands at N10 million.
Today, the Managing Director of Tiwantiwa MFB Ltd approached your bank with a
request for overdraft facility of N3 million to accommodate their operations which may
likely increase due to forthcoming festival. When asked for security, the Managing
Director of Tiwantiwa MFB Ltd says their Fixed Deposit, due to mature in the next three
(3) months will be good for the temporary facility.
Required:
(a) How would you take the security? (16
marks)
(b) What are the advantages of accepting this security to your bank? (4
marks) (Total
= 20 marks)
2017/CB/B/04
Question 7
Mallam Alico Abdullahi, a young textile merchant, has been in account relationship with
your bank for over ten(10) years. His account has been satisfactorily operated with his
previous temporary overdraft always respected. Today, Mallam Alico Abdullahi calls to
ask for an overdraft facility of N350,000 to enable him meet his customers’ demand.
You have agreed to assist subject to satisfactory legal assignment over a life policy on
his life with a surrender value of N500,000 as at date. The policy however, has Mallam
Alico Abdullahi’s wife, Fatima Abdullahi and his two children – Yaro Abdullahi and Shainab
Abdullahi as beneficiaries.
Required
Set out the procedure for taking the security so as to protect the bank fully at all
times.
(20
marks)
Question 8
Securitization is an arrangement which involves putting together a claim on particular

asset of a business which is then sold as a negotiable security in the financial markets.
Required
(a) List four (4) objectives of securitization. (4
marks)
(b) Identify four (4) major stakeholders and their roles in the securitization process.
(8
marks)
(c) Enumerate four (4) benefits each to the assignor and investors in securitization.
(8
marks)
(Total = 20
marks)

2015/CB/A/04
PRACTICE OF BANKING
Wednesday, April 15
Morning
(xii) Read ALL instructions on the cover of the Answer Booklet carefully.
(xiii) Accuracy and neatness will be taken into account in the award of marks.
(xiv) Use only ball point pen.
(xv) Maximum marks allotted are as indicated on the questions.
(xvi) Only non-programmable calculators are allowed.
(xvii) Each answer must begin on a new page.
(xviii) You are expected to show and attach details of all calculations and reasons for your
(xix) Telephone, books, papers or unapproved documents shall not be brought into the
Examination Hall.
(xx) ONLY approved examination documents and writing materials i.e. ball point pen, pencil,
(xxi) ATTEMPT - FIVE (5) QUESTIONS IN ALL.
(xxii) TIME ALLOWED: 3 HOURS.
Turn Over
2015/CB/A/04
SECTION A
Question 1
(a) You are the manager of Tiwantiwa Bank in the village of Mobase. Dr. Maxwell, a
dental surgeon with an extensive practice is one of your highly respected
customers. You have had course to discuss with him, his practice of drawing
cheque beyond his credit balances in his account.
Recently, this practice of his had gone out of hand with the result that cheques
have had to be returned for lack of funds. You do not wish to continue the
relationship with Dr. Maxwell and there is still a small credit balance in his account
at the close of today’s business. Your assistant is suggesting that this is a good
opportunity to forward to Dr. Maxwell a cheque for the balance in his account,
advising him on the closure of his account.
Required:
Critically appraise the suggestion of the Assistant Manager and state with reasons
what actions you would take in the circumstance. (10 marks)
(b) Mr. Eleshinla has maintained a satisfactory account at your branch for four years.
Six months ago, he was granted an overdraft facility of N10,000. The account
had since retained an uncleared debt of N5,950.00.
You have written to him on two occasions asking for the debt to be cleared but
no satisfactory reply had been received while the account remains stagnant. In
the post today is a letter from Mr. Eleshinla enclosing a bankers’ draft for N6,500
in his favour with an instruction that the proceeds of the draft be used to honour
a cheque in similar amount that he had drawn in favour of Sunflower Limited.
Required:
State, with reasons, the action you would take in the circumstance.
(10 marks)
(Total = 20 marks)
Question 2
Explain the legal implications for your bank in each of the following situations:
(i) It has inadvertently paid a stopped cheque.
2015/CB/A/04
(ii) It has paid a crossed cheque on which the payee’s endorsement has been forged.
(iii) It has paid an open cheque across the counter five minutes after the close of
business and first thing in the morning of the next working day, the drawer
countermands payment.
(iv) It has paid a bill of exchange domiciled with it on which the payee’s endorsement
has been forged.
(v) A third party presented an incomplete cheque across the counter with the date
missing, the payee borrowed the biro of the customer to fill in the current date
and the cashier paid.
(20 marks)
Question 3
(a) Shade, a customer of Kampe Bank Plc paid into her account a cheque for N5,000
payable to another party or order and crossed not ‘negotiable’. Shade has lodged
this cheque to her account without any endorsement. She persuaded the bank
to allow her to draw N3,000 cash against the uncleared effect the same day.
Unknown to the bank, Shade has obtained the cheque from the payee by fraud.
Consequently, the drawer countermanded the cheque and was returned from
clearing dishonoured. The bank is now claiming N3,000 against the drawer on
the ground that the collecting bank is a holder for value to the extent of N3,000.
The drawer denies liability on two grounds, firstly, that the bank could not become
the holder of the cheque because Shade did not endorse it to the bank and
secondly that in any event, the bank cannot have a good title as the cheque was
crossed not negotiable
Required:
Critically examine these circumstances and advise the two banks as to their rights
and duties on the cheque. (10 marks)
(b) A draft issued by a bank at customer’s request payable to a third party is

afterwards returned to the bank by the customer with the payee endorsement at
the back. This is because the purpose for which the draft was procured has been
abandoned. The account of the customer was credited with the value of the draft
less bank charges.
2015/CB/A/04
1. Would the bank be liable to the payee for the amount if:
(i) The draft has in fact not been delivered back to him?
(ii) The draft has been lost?
2. Can a banker stop payment of a draft issued by it?
(10 marks)
(Total = 20 marks)
SECTION B
Question 4
XYZ Plc is an international conglomerate involved in heavy construction of roads and

haulage business. Its Headquarters is in Lagos with branches in most state capitals in
Nigeria. Some seven (7) years ago, it secured a credit facility of N500 million from your
bank to enhance its working capital.
Recently, it has lost government patronage due to unclear reasons and had been finding
it difficult to pay interest due on the loan. Current balances on the accounts of the
company with you are as follows:
 Loan Account N450 million debit
 Interest Accruable Account N14 million debit
 Current Account N17 million credit
At the recent review Committee meeting of your bank, fears were raised as to the need
to quickly realize the security for the credit facility which was a fixed and floating
debenture on the company assets.
The Head of Operations has directed you to state, step by step, the procedure for
realization of the security.
Required:
Write your memo to the Head of Operations in response to his directive.
(20 marks)
Question 5
The Great University of Africa was licensed by the National University Commission some
six (6) years ago and it has enjoyed a steady growth in numerical strength and
infrastructure wise.
Further development of the university now requires that it raises N2 billion using the
Certificate of Occupancy covering its 100 hectares University land as security.
Your bank is not in a position to advance the entire loan, and has discussed the idea of
consortium lending with the Pro-Chancellor of the University, which is agreeable to him.
2015/CB/A/04
Required:
(i) Explain what you understand by consortium lending and the rationale behind it.
(ii) Explain the step-by-step procedure of arranging a consortium lending including
the roles of the lead bank.
(20 marks)
Question 6
Odo-Osun State Government has awarded a road construction contract to one of your
customers in the sum of N150 million. The government is prepared to advance 50%
mobilization fee to your customer, Messrs Road Construction Affairs, but before the
mobilization fee is paid to your customer, it is required to submit a performance bond
from a reputable bank for which your bank is considered good enough.
Your bank is favourably disposed to assisting your customer.
Required:
(a) State clearly the procedure for perfecting your choice of security for the bond that
would ensure that the bank’s exposure is well protected. (5 marks)
(b) What are the advantages of taking performance bond as security? (5 marks)
(c) What are the weaknesses of performance bond as security? (5 marks)
(d) What are the differences between performance bond and advance payment
bond? (5 marks)
(Total = 20 marks)
Question 7
You have granted an unsecured overdraft facility of N500,000 to Mr. Smart Jacob whose
account has been dormant for months shortly after the advance. Balance on the account
now is slightly over the limit of N500,000. After repeated demands, he has called on
you to discuss the matter but you are unable to agree on a satisfactory repayment
programme. During your meeting, you have insisted on his provision of an acceptable
security to which he is offering his life insurance policy for N2.5 million which has been
deposited with the insurance company to secure a small loan of N50,000 he took some
years ago from the insurance company. He seems to be sure that the surrender value
will cover both advances. You are desirous of taking a second charge on the policy to
cover the risk exposure of your credit facility to him.
2015/CB/A/04
Required:
(a) Describe the procedure you will adopt to safeguard your bank’s position.
(b) State the weaknesses of that type of security arrangement (if any).
(20 marks)
Question 8
Mr. Adelami, a valued customer of your branch called to inform you that he has to pay
for a consignment of goods to be received urgently and would like to ascertain if you
would agree to extend an overdraft facility to him in the sum of N1.8 million for six
months.
You are favourably disposed to his request provided he is able to provide suitable and
acceptable security arrangement.
He further informed you that you are holding on simple deposit, the title deeds of his
house valued N8 million for his son’s existing facility of N500,000. Though there has
been no memorandum of deposit, he is willing to use the property as security for the
two facilities but quickly informed you that his son’s debt should be increased to
N1billion. However, he is not prepared to execute any mortgage document as he is sure
that all the credit facilities will be paid as at when due.
Required:
(i) Should you agree to the security arrangement, what is the bank’s position?
(ii) Mention the difficulties that may arise in future and how they should be handled.
(20 marks)

ACIB Past Questions PDF

Uploaded by

Copyright:

Available Formats

ACIB Past Questions PDF

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

ACIB Past Questions PDF

Uploaded by

Copyright:

Available Formats

PAST QUESTIONS

Professional Certification Training

THE CHARTERED INSTITUTE OF BANKERS OF NIGERIA

BANK LENDING AND CREDIT ADMINISTRATION

(c) In order to control/minimize credit risks, it is imperative that appropriate standard

(b) Overtrading is essentially a problem of growth in business operations. It happens when

Bank O/D 1,900 2,100 2,800

Net Current Assets 2,200 700 (1,100)

PROFIT AND LOSS ACCOUNT

2014 2015 2016

HERBAL PRODUCT LTD

N’000 N’000 N’000 N’000

PROFIT AND LOSS

An important function of credit management is credit control. This is primarily a process of

What would be your response? (5 marks)

Songodara Enterprises Limited

Sales: Credit 1,100,000

(b) Identify those problems a company would be hoping to overcome by employing a

(a) What is your explanation of consortium/syndication lending? (3 marks)

(b) Discuss the elements of credit risk management procedures. (8 marks)

(i) Watch list

(b) Discuss the elements of credit risk management procedures. (8 marks)

(i) Watch list

- Value of Property 55,000 (owned jointly)

- Mortgage Outstanding 36,000

Dr. Oloye tells you that:

(iv) regulatory, and

(v) institutional environments of banks impact decisively on their lending operations.

Discuss succinctly but comprehensively. (4 marks each)

Victors Supplies Ltd.

Victors Supplies Ltd.

(d) How can Mr. Michael be discharged? (5 marks)

(iii) Altruism (15 marks)

should be the attitude. (15 marks)

SECTION C: CORPORATE GOVERNANCE

(ii) The duties of directors in a company. (8 marks)

SECTION A: BANKING LAW

Discuss the following under the Bills of Exchange Act.

(a) State what you understand as “Security” in a banker/customer relationship?

(c) What do you understand by “Adjudication Order” in Bankruptcy?

Write short notes on each of the following:

Examine the ethical issues involved. (Total = 20 marks)

SECTION C: CORPORATE GOVERNANCE

(i) Theory of comparative advantage demonstrates that mutually advantageous trade

(iii) Which country uses the currency ‘KRONA’

(b) Sell at a floating rate when expressed in terms of a common currency

(c) Sell at a different price when expressed in terms of a common currency

(d) Sell at a cross rate when expressed in terms of a common economy

(a) Translation Exposure

(a) Purchasing Power Parity theory

(ix) UNCTAD is a United Nation Institution that:

(a) Makes loans to poor countries only

(a) Short position

(a) Export credit guarantee

(xviii) Unutilised RDA funds must be repatriated to CBN within ________________

(a) 7 working days

(a) Exchange rate in Yen/Naira (Y/N) in the interbank market is given as

An exporter requests his bank to purchase a bill for Y350,000.

Write short notes on the following: