Key highlights
- Nigerian banks are not directly exposed to Silicon Valley Bank, according to the Central Bank Governor, Godwin Emefiele, after a review of all bond portfolios of Nigerian banks.
- Nigerian banks are healthy and meet all the prudential guidelines set by the CBN, with an NPL of 4.2%, a capital adequacy ratio of 13.7%, and liquidity and loan-to-deposit ratios of 43% and 52%, respectively.
- Nigerian startups exposed to Silicon Valley Bank will be paid in full, but any company with debt exposures such as bonds stands the risk of losing its money.
Nigerian banks are not “directly exposed” to Silicon Valley Bank according to Central Bank Governor, Godwin Emefiele.
The CBN Governor made this statement when responding to questions at the monetary policy committee held in Abuja.
According to the CBN Governor, the apex bank conducted a review of all the bond portfolios of Nigerian banks and determined that none of them were exposed to the failed bank. He did not speak to exposure to other banks currently caught in the line of fire such as Credit Suisse.
Emefiele also stated that Nigerian banks are healthy having met all the prudential guidelines it set for the financial system. According to Emefiele, Nigerian banks already implement CBN prudential guidelines such as its cash reserve ratios, capital adequacy ratios, non-performing loans (NPL), and liquidity ratios.
Godwin Emefiele also suggested that Nigerian banks are ultimately owned by bank depositors and not shareholders. According to him, “we will rather dispose of shareholders than make depositors lose money” suggesting that bank customers had more no lose in banks than their shareholders.
Data showing Nigerian banks are safe
The apex bank governor stated that in terms of CRR, Nigerian banks kept about 43% of their cash with the apex bank as a buffer for any eventuality.
- Emefiele also stated that banks have an NPL of 4.2% and a capital adequacy ratio of 13.7% which is well within prudential guidelines.
- In terms of liquidity ratio and loan-to-deposit ratio, the apex bank governor also stated the figure at 43% and 52% respectively.
- Emefiele also stated that these prudential guidelines were the reasons why he believes Nigerian banks are “very very” safe and not as vulnerable to their counterparts in the US or Europe.
He also stated that no depositor has lost any money to any failed bank since 2003 claiming that Nigeria’s banking resolution process has protected bank depositors.
Nigerian Startups and SVB
Nairametrics had reported earlier that several Nigerian startups are exposed to the failed US bank, Silicon Valley Bank, which was closed down by US regulators due to a rush of deposit outflows.
These startups also operate bank accounts with the US and UK arms of the bank, especially those affiliated with the likes of YCombinator and Tech Starts.
However, the promise to pay all depositors means Nigerian Startups exposed to the bank will be paid in full without the risk of losing their money. Nonetheless, any company that had debt exposures such as bonds stands the risk of losing its money.