- Stakeholders Demand CBN Report on Financial Market Status
Stakeholders in the financial industry have emphasised the need for the Central Bank of Nigeria to issue a report on the status of the financial market.
According to them, the collapse of Skye Bank Plc is darkening the outlook for Nigeria’s other small lenders struggling to recover from the economy’s contraction two years ago, and threatening to derail the regulator’s ambitions of expanding the industry, Bloomberg reports.
The CBN revoked Skye Bank’s licence for failing to meet capital and liquidity thresholds. The Lagos-based company’s battle to raise more cash as a buffer against potential shocks is playing itself out in other parts of the industry, with some of Skye’s peers resorting to the sale of bad loans or ditching business outside of Nigeria to clean up their balance sheets.
The Head, Research and Strategy, Elixir Investment Partners, said the CBN report on the health of the financial market would help improve investor confidence.
The CBN Governor, Godwin Emefiele, after a monetary policy meeting in Abuja on Tuesday, said the industry remained sound even though there would always be strong points and weak points in every chain.
He stated that the CBN was striving to ensure that there were more banks rather than having them liquidated.
“We are embarking on a journey to keep a bank alive, to protect depositors’ monies and also ensure that we do not throw over 5,000 staff of that bank into the labour market,” Emefiele had stated.
According to him, the regulator established Polaris Bank to take over the assets and liabilities of Skye and asked the Asset Management Corporation of Nigeria to capitalise the new entity with a view to eventually selling it.
Bloomberg reported that these actions were invoking memories of government bailouts after a credit crunch in 2009, when AMCON was set up to take on the bad debts and save the industry.
A banking analyst at FBNQuest Merchant Bank, Olubunmi Asaolu, told Bloomberg that while the country’s biggest lenders now had strong capital buffers as well as solid assets and earnings, developments with Skye showed that the industry consisted of a mix of stable and not-so-stable banks.
Asaolu added that the smaller banks had generally been closer to a precarious position than the market would like since the end of the last crisis in 2009.
“For anyone to invest in a tier two bank, they need to be convinced the opportunity is significant,” he noted.
Stress tests by the CBN showed that only the largest banks would withstand a 50 per cent increase in non-performing loans. The NPLs stood at 15 per cent at the end of June 2017 from 12.8 per cent at the end of December 2016.
The Chief Financial Officer, Unity Bank Plc, Ebenezer Kolawole, said the bank was trying to raise about N270bn ($743m) to recapitalise its operations after selling its bad-loans book.
He added that the bank hoped to conclude talks with an investor during the first half of 2019.
Shares in Wema Bank Plc have dropped by eight per cent since Skye Bank was seized a week ago, while Diamond Bank has declined by six per cent and Unity Bank by five per cent, Bloomberg reports.
Sterling Bank gained three per cent over the period.
A bank analyst at Vetiva Capital Management Limited, Lekan Olabode, said the central bank’s swoop on Skye Bank would result in shareholders losing money and would put a lot of fear in people about backing other small lenders.
