CBN Confirms Stability in Nigerian Banking Sector
By Patience Ikpeme
The Nigerian banking industry has received reassurance from the Central Bank of Nigeria (CBN) that it remains resilient, with key financial soundness indicators meeting regulatory thresholds.
According to the CBN’s most recent Economic Report for 2023, the industry’s Capital Adequacy Ratio (CAR) fell to 11.2% from the previous quarter’s 14.2%.
While this is above the benchmark for banks with national/regional authorization, it falls below the threshold for international authorization.
This decrease can be attributed to a decline in total qualifying capital and an increase in risk-weighted assets due to the depreciation of the naira exchange rate under the bank’s market-determined exchange rate policy.
Despite this decline in CAR, the CBN is actively engaging with various stakeholders to maintain confidence in the Nigerian financial sector. Mrs. Sidi Ali Hakama, the Acting Director of Corporate Communications, emphasized the CBN’s commitment to sustaining the industry’s resilience.
The Q2 Economic Report also highlighted a slight decline in Non-Performing Loans (NPLs), which decreased from 4.5% in the previous quarter to 4.1% in Q2 2023. This improvement reflects ongoing efforts by banks to recover loans and maintain asset quality. Importantly, the NPL ratio remains below the prudential threshold.
Overall, while there are certain challenges facing the Nigerian banking industry, the CBN’s report highlights its commitment to ensuring the industry’s stability and safeguarding the interests of stakeholders. With continued engagement and efforts to maintain confidence, the industry is well-positioned to navigate these challenges and continue contributing to Nigeria’s economic growth.
