CBN assures public of strong banking sector amidst economic challenges
By Sodiq Adelakun
Amidst ongoing conversations about a fresh round of recapitalisation, the Central Bank of Nigeria (CBN) has released a statement affirming the robustness of the country’s banking sector.
This announcement is particularly significant as it addresses the concerns raised by the dual challenges of internal and external economic strains that the banks are currently navigating.
The findings provide reassurance to stakeholders that despite the potential upheavals associated with recapitalization efforts, the banking sector remains on solid ground.
The central bank’s evaluation highlighted the sector’s resilience and is expected to contribute positively to the ongoing discourse on how best to fortify the banks for future stability and growth.
“The Central Bank has given assurances on the soundness of the Nigerian Banking sector, even amidst the macroeconomic challenges facing the economy due to both external and internal shocks. This statement was contained in the CBN 2023 Economic Report.”
According to the apex bank, Nigerian banks recorded a capital adequacy ratio of 14.2 percent, higher than the 13.8 percent recorded in the previous quarter.
The Capital Adequacy Ratio (CAR), is a critical measure of a bank’s ability to absorb potential losses. The apex bank also stated that in the area of asset quality which is measured by the Non-Performing Loans (NPL) ratio, there was a slight increase to 4.5 percent. This remains below the 5.0 percent prudential benchmark, indicating a controlled level of credit risk within the sector.
In terms of Industry Liquidity Ratio (LR), the bank stated that there was a notable improvement in the LR, which rose to 73.8 percent, significantly higher than the preceding month’s 62.2 percent and well above the 30.0 percent regulatory requirement. This suggests a strong capacity of the banks to manage short-term liabilities.
The Central Bank of Nigeria (CBN) announced its intention to carry out a fresh round of banking recapitalization for the Deposit Money Banks (DMBs).
The Governor of the Central Bank of Nigeria (CBN), Mr Olayemi Cardoso announced on Friday night during the 58th Annual Bankers’ Dinner in Lagos, organised by the Chartered Institute of Bankers of Nigeria (CIBN).
The planned recapitalisation means that DMBs will be required to raise additional capital to meet the demands of Nigeria’s economy.
Cardoso highlighted that in his report to the Policy Advisory Council on the national economy, President Bola Ahmed Tinubu set an ambitious target of reaching a $1 trillion Gross Domestic Product (GDP) by 2030.
