The Central Bank of Nigeria has said that there is no doubt about the financial strength of Nigerian Deposit Money Banks in the country.
Nigeria has 20 banks based on the update of the regulator as of June 2021.
The CBN stated this position in the Communique issued at the end of the 138th Monetary Policy Committee Meeting.
The apex bank based its judgement on the Capital Adequacy Ratio (CAR) and the liquidity Ratio of banks which it said are above prudential limits.
The central bank governor, Godwin Emefiele said, “The MPC noted that the Capital Adequacy Ratio (CAR) and the Liquidity Ratio (LR) both remained above the prudential limits at 15.2 and 41.7 per cent, respectively at end-July 2021.”
The Capital Adequacy Ratio is used to measure the strength of banks in an economy by using its capital and assets.
The CBN uses the CAR to protect depositors and promote the stability and efficiency of financial systems.
The Liquidity Ratio is used by the CBN to ensure that Nigerian banks have high-quality liquid assets enough to fund cash flows for a period of time.
The regulator fixed the liquidity ratio of banks at 30 per cent, while the CAR required by the CBN is 15 per cent.
But assets of banks have been on the rise, banks financial records reveal.
In the first half of 2021 banks like Access Bank have assets worth N10.1trn, Zenith Bank with N8.5trn assets and First Bank of Nigeria N8.02trn.
The CBN also revealed an improvement in banks Non-Performing Loans which was 5.4 per cent in July.
“The Committee, also, welcomed the improvement in the Non-Performing Loans (NPLs) ratio at 5.4 per cent in July 2021, compared with 5.7 per cent in June 2021. The Committee thus urged the Bank to sustain current efforts to bring NPLs below the 5.0 per cent prudential benchmark.”