After trending for more than two days, the Central Bank of Nigeria(CBN) has finally put a lie to the report that Nigerian banks are facing a full-blown financial crisis just as it threatens violators of its $50,000 cap withdrawal rule with a ban on foreign exchange (forex) market.
These were part of the outcomes of the Wednesday’s Bankers’ Committee meeting in Lagos.
According to Mrs Tokunbo Martins, the central bank’s Director of Banking Supervision, who disclosed this to the press, the report is false and should be totally ignored.
Recall that Arqaam Capital, a Dubai-based investment bank and brokerage firm, said last weekend that Nigeria’s banking industry is experiencing a full-blown financial crisis as failed fiscal and monetary policies lead to a credit crunch
“Our acid test reveals seven under-capitalized banks with a deficit of as much as 1 trillion naira ($3.2 billion) in the financial system”, the report said.
Reacting to this, Mrs Martins said: “That report is false; that certain banks are undercapitalized is absolutely not true.That is not saying that the banking sector is not feeling the economic headwinds. So it is too in any other jurisdictions. It is not strange.
“Also that the non-performing loans is at 11 per cent.That is not what we need to focus on. What we need to focus on is that we have the 11 per cent non-performing loans. Does the bank have the capacity to absorb any losses that may arise from these loans? Yes, they do.They have very strong capital buffers. Another thing that is very important is that banks have huge capacity to generate income. So apart from the capital buffers that they already have, they also have capacity to generate income to also absorb all those losses if they do arise. And the loans that are not performing, can they be performing? Yes, they will.Because the underlying assets are still there and they are good.
“The fact that the country has non-performing loans at a period like this is to be expected.And I don’t think that any jurisdiction should be demonized because of it. If you look at other jurisdictions that are going through the same circumstances that we are going through , they are experiencing the same thing.These jurisdictions have non-performing loans as high as 15 per cent to 25 per cent. So countries in Europe have NPL as high as 18 per cent.”
As for those who violates the rule of maximum withdrawal of $50,000 on debit Naira card, she said: “You will recall that sometime ago,in CBN’s bid to manage demand for forex,there was a rule that was put in place that people are not allowed to withdraw more than $50000 across the industry on the Naira debit card. For while now, people have been breaching that rule.
“The CBN had not taken any steps until now.But we have decided that it is now time for us to take steps to check this.So we want members of the public to remember that that rule is in place.All your cards are linked to a particular BVN. Now that BVN is only allowed to withdraw $50000 per annum. If people continue to breach that rule, they would lose access to this money; they would lose access to foreign exchange market entirely.”