CBN Debunks Low Bank Capitalisation Report

This is coming after reports emerged recently that three Nigerian banks are in critical conditions with seven others undercapitalized due to the economic recession.

International rating agency, Moody’s and analysts at Dubai-based investment firm, Arqaam Capital, indicated Monday that seven Nigerian banks are undercapitalised to the tune of N1tn ($3.2bn), adding that the country’s banking industry was experiencing a “full-blown financial crisis” with some banks facing insolvency.

However, following the bankers’ committee meeting held in Lagos on Wednesday, director of banking supervision of the CBN, Tokunbo Martins, while briefing journalists noted that the banks in the country are well capitalised to absorb losses that may arise from non-performing loans.

He also assured that supply of foreign exchange for manufacturers will be improved.

Nigeria’s economy is currently in recession, as a result of a dip in oil production which accounts for more than 70 percent of the nation’s revenues, with the value of the currency falling daily and ultimately inflating the cost of goods and services.

“That certain banks are undercapitalised is certainly not true. That is not to say that the banking sector is not feeling the economic headwinds, so is every other jurisdiction, so non-performing loans at 11 per cent is not what we need to focus on,” Martins said.

“What we need to focus on is that do the banks have the capacity to absorb all the losses that will arise from those loans and the answer is yes, they do. They have very strong capital buffers. The banks have very huge capacity to generate income apart from the capital buffers that they already have.

“They have huge capacity to generate income to absorb those losses if they do arise. And those NPLs, can they perform, yes they can because the underlying assets are still there and they are good. I think we should totally dispel or ignore this kind of story, it’s not one that we should take seriously at all,” the director emphasised.

The apex bank also threatened to bar bank customers who who make foreign exchange withdrawals above the stipulated limit on naira MasterCard.

She, however, said that henceforth, any bank customer who exceeds the daily and annual limits would no longer have access to foreign exchange.

The Nigerian Central Bank had cut international spending limit on naira cards via ATMS, POS and Web to $50,000 annually and $300 daily.