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CBN May Take Over Some Undercapitalized Banks

By Austin Johnson

There are indications and fears that the Central Bank of Nigeria may take over some systemic distress bank.

This is afollow up on a Dubai-based international investment bank, Arqaam Capital alarm over the  soundness of Nigeria’s banking industry after a stress test it conducted recently. The investment bank stated that seven banks were jointly under-capitalised to the tune of N1tn ($3.2bn).

The report by Arqaam explained that Unity Bank Plc and Skye Bank Plc were close to being insolvent, adding that lenders like FBN Holdings Plc and Sterling Bank Plc would require dilutive capital increases. It further says that, “Our acid test reveals seven under-capitalized banks” with a deficit of as much as 1 trillion naira ($3.2 billion) in the financial system, Meijer and Sleiman said. After the stress test, the company expressed discomfort at the health conditions of the following banks namely, FBNH, Unity Bank, Diamond Bank, Skye Bank, FCMB Group, Sterling Bank and Fidelity Bank.

However, the Central Bank of Nigeria (CBN) has insisted that no local bank is presently undercapitalised. The director, Banking Supervision, Mrs. Tokunbo Martins, has already come in  defence of banks, saying that there was no truth in the Arqaam report.

Mrs. Martins who agreed that commercial banks were facing some challenges, noted that this was not peculiar to Nigeria, revealing that Non-Performing Loans (NPL) which stands at 11 per cent was not a major focus for now. “As Director Banking Supervision, I wish to state that the report that seven banks are undercapitalised is not true.

“That our banks have non-performing loans at 11 per cent is not the focus for now. We should totally ignore such a story,’’ she explained.

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