Falling Oil Price: Nigerian Lenders are Safe – CBN, Banks

The Central Bank of Nigerian (CBN) and chief executives of banks in the country have allayed fears over the industry’s exposure to the oil and gas sector, saying the lenders are in good health despite the crash in global crude oil prices.

This is in response to reports that banks might incur huge non-performing loans following their huge exposure to the oil and gas industry as there has been a persistent drop in oil prices.

The price of Bonny Light, stood at $58 at the weekend according to CBN figures.

Rising from the first Bankers’ Committee Meeting for this year, last week, the bankers assured that while many banks were exposed to the oil and gas sector, the events in the sector is less likely to affect their books adversely. According to the director, Banking Supervision, CBN, Tokunbo Martins, the committee discussed banks in terms of capital adequacy ratio in terms of liquidity, profitability and asset quality and came to a conclusion that all the ratios remain satisfactory, as all the banks were on average above regulatory minimum.

She noted that based on the stress test carried out on the banks’ books, “it was concluded that all the ratios remained satisfactory. It was encouraging that despite all the headwinds globally, the domestic banking industry remains sound, safe and resilient.”

Likewise, the managing director and chief executive of Guaranty Trust Bank, Segun Agbaje, while stating that banks can always elongate the tenure of their loans, noted that “the CBN has done an extensive stress test using $50 to $55 per barrel and the books of the banks are in a fairly decent shape.”

On the issue of domiciliary account, the Bankers’ Committee unanimously agreed that there will be no change in the operation of domiciliary accounts, adding that they will remain unverted access towards inflows of domiciliary accounts.

“People believe that things are tough now but the CBN remains committed to running an open foreign exchange policy and domiciliary accounts operation will remain”, Agbaje noted.

The CBN, believing that domiciliary transactions are used for round tripping by banks, had directed that banks submit details of domiciliary account holders, including name, account number and balances at January 29, 2015.It also required banks to present the total balance of all domiciliary accounts as at the same date, list of corporate domiciliary account holders and their balances, list of individual domiciliary account holders and their balances, list of public sector institutions domiciliary account holders and their balances as well as the modes of lodgements to the account transactions (either by cash or wire transfer).

Domiciliary deposits were equivalent to 21 per cent of total deposits of N17 trillion in the Nigerian banking system as at half year 2014 or $19.5 billion, according to the data from an investment firm, Renaissance Capital.

The Bankers’ Committee also reassured the stakeholders in the foreign exchange market that there is no need to panic as the CBN has promised to meet all genuine demand of foreign exchange. It also noted that it has been widely reported that with the drop in oil prices, the federal government’s fiscal position is challenged.

Consequently, it noted that there was a N75 billion increase in non-oil revenue in the prior year and expect that this year, it will increase to N150 billion.

Source : Leadership

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