Dipo Olowookere
By Modupe Gbadeyanka
Central Bank of Nigeria (CBN) has maintained that commercial banks operating in the country are still very sound and have strong capital base.
This comes after a report claimed some Nigerian banks were undercapitalised and that two of the banks were close to being insolvent.
Director, Banking Supervision at CBN, Mrs Tokunbo Martins, while fielding questions from financial correspondents in Lagos on Wednesday, said the report by a Dubai-based investment company, Arqaam Capital, claiming that some banks were unhealthy was false.
According to Mrs Martins, to say seven banks in Nigeria are undercapitalised is absolutely not true, pointing out that it would be however false to say that the banking sector was not feeling the economic situation in the country just like other sectors.
“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,” Mrs Martins said at the end of the Bankers’ Committee meeting.
The CBN’s assertion that banks in Nigeria were still healthy comes when Fitch, an international ratings agency, acknowledged that banks in the country had experienced a sharp rise in non-performing loans (NPLs).
