The Central Bank has finally responded to a Bloomberg report that suggested that about 7 Nigerian Banks needed recapitalization. The report cited an analysis from Dubai based Arqaam Capital. The report had specifically named Skye Bank and Unity Bank as those “close to being insolvent”.
However the Director, Banking Supervision, CBN, Mrs. Tokunbo Martins, has debunked this claim, insisting that Nigeria’s banking sector is strong. Here is her comment.
“That is not to say that the banking sector is not feeling the economic headwinds, they are. Just like every other jurisdiction. It is not strange. “Non-performing loans (NPLs) at 11 per cent is not what we need to focus on. What we need to focus on is if the banks have the capacity to absorb losses that may arise from those NPLs? And the answer is yes. They have very strong capital buffers.
“Another thing that is important is that Nigerian banks have very huge capacity to generate income to also absorb those losses, if they do arise. And then the loans that are non-performing, can they re-perform? Yes they will because the underlying assets are still there and they are good.
“The fact that the country has NPLs at a period like this should be expected and is not a thing that any jurisdiction should be demonised about. “Other jurisdictions going through what we are also going through are experiencing the same thing.
There are countries that have NPLs as high as 15 per cent, some 30 per cent, and some countries in Europe have NPLs as high as 80 per cent.”
It is unclear how the market will react to her comment considering how repugnant the market feels about the CBN. Earlier on Wednesday, Fitch had also opined that Nigerian banks was grappling with a rising percentage of non performing loans to total loans. The rating agency also mentioned that were it not for the restructuring of oil and gas loans which makes up about 30% of total bank loans, the situation may have been worse.