UPDATE: Nigerian Banks are Resilient, will Survive SBV’s Collapse – Emefiele

UPDATE: Nigerian Banks are Resilient, will Survive SBV’s Collapse – Emefiele

The Central Bank of Nigeria (CBN) governor, Godwin Emefiele, has been speaking to the healthiness of Nigerian banks against the backdrop of the recent collapse of the Silicon Valley Bank (SVB).

Speaking to journalists after Tuesday’s Monetary Policy Committee (MPC) meeting, the CBN governor said Nigeria banks are resilient and immune to any unforeseen headwinds due to series of prudential guidelines designed by the apex bank to shield them from such.

“Immediately this happened last week, we tasked our banking supervision department to ask for the bond portfolio which is the main area of investment of banks. The report that came back to us was that there is no direct investment by Nigerian banks in SVBs that could result in a loss of investment. That is on one part, on the the second part, we began to say how are we sure that the Nigerian banking system is reasonably isolated to ensure that what happened in United States does not happen in Nigeria . So we reviewed the various prudential guidelines we have put in place.

“Nigeria is one of the few countries in the world where we have cash reserves deposit requirements. What is cash deposits requirement? It has been there even before I started banking. When you deposit your money in a bank, a certain percentage of that deposit is held or serialised at the CBN to ensure that when there is liquidity crisis that money is available for that bank to use and solve that liquidity problem so that people who deposit don’t just lose their money. We also have liquidity ratio which is an indices of specified liquid assets against total deposits of banks either held in cash in bank vault or bank balances or money etc.

“In Nigeria, our ratio is minimum of 30%. Banks keep above that, today liquidity ratio is almost about 43%. Cash reserve is about 32.5%.

“The loan deposit ratio which means that banks are not over trading is just about 52.47%. We are happy that inspite of maintaining these prudentials, the banks still remain profitable.

“The Return on Investments (ROIs), the return on equity and profitability ratio have remained relatively strong even though when banks convert those profitabilities from naira to dollar, they seem weaker but at the same time the Nigerian banks have continued to make profit and have continued to pay good dividends to their shareholders,” Emefiele said.