BY EMEKA EJERE
Ahead of the next Monetary Policy Committee (MPC) meeting of the Central Bank of Nigeria (CBN) slated for Monday and Tuesday, the banking sector regulator has reiterated that Nigerian Deposit Money Banks (DMBs) as well as the other financial institutions under its supervision are resilient, safe and sound.
CBN was reacting to “false and unfounded stories circulating in the social media attacking the soundness and safety of some Nigerian banks”.
Addressing journalists at the weekend, the CBN’s acting Director, Corporate Communications Department, Mr. Osita Nwanisobi, stated that the banking system had proven to be sturdy, despite the global challenges posed by the COVID-19 pandemic.
He maintained that routine bank examinations and stress tests for financial institutions operating in the country indicated that no bank licensed by the CBN is currently under any form of financial distress.
Nwanisobi further stressed that the banks had adequate capital to absorb unexpected losses that may arise, pointing out that the central bank had continued to monitor the activities of banks to ensure that no individual or institution breached the laid down guidelines in line with the bank’s resolve to ensure adherence to prudential standards.
The CBN spokesman, who called on the banking public to disregard any report alleging insolvency in the Nigerian banking sector, reiterated the desire of the bank to prioritise financial inclusion as a measured approach to increase the number of adults included in financial services provided by banks in the country.
He urged the banking public to take advantage of the services provided by the banks, particularly the intervention programmes initiated by the CBN, to enhance their economic status and contribute to overall national development.
The apex bank had severally reassured the banking public about the soundness and safety of the financial system. The MPC had noted in the communiqué issued at the end of its meeting that the banking industry is in good health
According to the communiqué, “the Capital Adequacy Ratio (CAR) and the Liquidity Ratio (LR) both remained above their prudential limits at 15.8 and 38.9 per cent, respectively. The Non-Performing Loans (NPLs) at 5.89 per cent in April 2021 showed progressive improvement compared with 6.6 per cent in April 2020.”
Also recently, CBN Governor, Godwin Emefiele, emphasised the resilience of the banking sector amidst the impact of the pandemic.
He said: “Let me say that the Nigerian banking system remains very strong and resilient. I will say that unlike in other climes, the Nigerian banking industry appears to be one of the well-regulated industries in the world today.
“Our prudential ratio has been prescribed for the banks and they are required to ensure that they abide by those prudential ratios – for instance, the non-performing loans ratio, the capital adequacy ratio, and the liquidity ratio.”
He added that: “To demonstrate the fact that the Nigerian economy remains sound and resilient, as of May 2019, non-performing loans ratio in the industry was 11.1 per cent. As of June 2020, NPLs have dropped to 6.41 per cent.
“The capital adequacy ratio, which is a ratio that measures the size of capital that banks deployed into real assets, as of June 2019, was 15.2 per cent, but as of June 2020, it has just remained flat at 15 per cent.
“For liquidity ratio, by August 2019, it was 48 per cent but as of June 2020, liquidity ratio had dropped to 37 per cent. Yes, the liquidity ratio has dropped and I will say understandably so because, for instance, you will note that from around July 2019 to June 2020, gross loans and advances into the economy as a result of the CBN’s loan to deposit ratio had increased by N3.33 trillion from N15.6 trillion from June 2019 to N18.9 trillion as at June 2020.”
Emefiele explained that these loans were advanced to some of the productive sectors.
“For instance, the manufacturing sector received N315 billion, retail and consumer loan sector received N615 billion, the agricultural sector received N255 billion, general cotton received N221 billion, and information and communication technology received N206 billion.”
“What we are saying is that despite this large sums granted in a year from N15.6 trillion to N18.9 trillion, the prudential ratio still looks so strong; this is a clear indication that the Nigerian economy and the banking system remain very strong and resilient and able to support the economic development of Nigeria.”