CBN Guarantees Safety, Resilience of Banking Industry

The Central Bank of Nigeria (CBN) yesterday reiterated the resilience, safety, and soundness of Nigerian Deposit Money Banks (DMBs) as well as the other financial institutions under its supervision.

The assurance came against the backdrop of “false and unfounded stories circulating in the social media attacking the soundness and safety of some Nigerian banks”.

However, the CBN’s acting Director, Corporate Communications Department, Mr. Osita Nwanisobi, told journalists that the banking system had proven to be sturdy, despite the global challenges posed by the COVID-19 pandemic.

He said 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, who spoke ahead of the next week’s Monetary Policy Committee (MPC) meeting of the apex bank, further stressed that the banks had adequate capital to absorb unexpected losses that may arise.
He pointed 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.

While also calling on the banking public to disregard any report alleging insolvency in the Nigerian banking sector, the CBN director 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.

Nwanisobi further 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 CBN Governor, Mr. Godwin Emefiele, recently 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 said 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.”

According to Emefiele: “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.”