Nigerian banks “are sound” as CAR rise to 14.2% – CBN

In a recent statement coinciding with discussions on a new round of bank recapitalization, the Central Bank of Nigeria (CBN) has asserted the soundness of the Nigerian banking sector.

The CBN’s report comes at a pivotal time, as the banking sector faces both the prospects of recapitalization and a landscape marked by internal and external economic pressures.

The report evaluates key financial health indicators of the banking sector, providing a data-driven perspective on its status.

“The Central Bank has given assurances on the soundness of the Nigerian Banking sector, even amidst the macroeconomic challenges facing the economy due to both external and internal shocks. This statement was contained in the CBN 2023 Economic Report.”

According to the apex bank, Nigerian banks recorded a capital adequacy ratio of 14.2%, higher than the 13.8% recorded in the previous quarter.

The Capital Adequacy Ratio (CAR), is a critical measure of a bank’s ability to absorb potential losses. The apex bank also stated that in the area of asset quality which is measured by the Non-Performing Loans (NPL) ratio, there was a slight increase to 4.5%. This remains below the 5.0% prudential benchmark, indicating a controlled level of credit risk within the sector.

In terms of Industry Liquidity Ratio (LR), the bank stated that there was a notable improvement in the LR, which rose to 73.8%, significantly higher than the preceding month’s 62.2% and well above the 30.0% regulatory requirement. This suggests a strong capacity of the banks to manage short-term liabilities.

Economic Outlook and Recapitalization
Nairametrics earlier reported that the Central Bank of Nigeria (CBN) announced its intention to carry out a fresh round of banking recapitalization for the Deposit Money Banks (DMBs).

Olayemi Cardoso, the Governor of the Central Bank of Nigeria (CBN), announced on Friday night during the 58th Annual Bankers’ Dinner in Lagos, organized by the Chartered Institute of Bankers of Nigeria (CIBN).

The planned recapitalization means that DMBs will be required to raise additional capital to meet the demands of Nigeria’s economy.

Cardoso highlighted that in his report to the Policy Advisory Council on the national economy, President Bola Ahmed Tinubu set an ambitious target of reaching a $1 trillion Gross Domestic Product (GDP) by 2030.