The Central Bank of Nigeria (CBN) has cleared the air over the health of Nigerian banks.
According to the bank, its recent top-down stress tests of Deposit Money Banks (DMBs) reaffirmed that Banks in the country’s finance market are sound.
The result of the stress tests revealed that the banks have adequate capital to absorb unexpected losses, CBN said in a statement at the weekend.
The bank said that the unaudited results of banks, and the results released so far, indicated that economic headwinds had not significantly affected returns.
According to the banking sector regulator, it has directed banks to put in place an effective risk management system, especially as it concerns price hedging.
The statement added that the CBN would continue to monitor banks to ensure sufficient internal retention of capital to serve as buffers.
The International Monetary Fund (IMF), in a Press Release on March 4, 2015, disclosing the outcome of the IMF Executive Board 2014 Article IV Consultation with Nigeria, commended the efforts of the CBN in ensuring financial system soundness.
The IMF in the statement said, “Directors noted that financial soundness indicators remain above prudential norms, but the concentration of credit risks and foreign currency exposures call for continued close oversight. They welcomed progress in strengthening supervision and regulation, including of cross border activities, and encouraged additional initiatives to foster financial market development, including of hedging instruments, and improve financial inclusion.”
The Directors also commended the unification of rDAS and the interbank foreign exchange market rates, noting that greater exchange rate flexibility could help cushion external shocks.
The IMF statement further noted that Nigeria’s economic data are broadly adequate for surveillance, just as it agreed that tightening fiscal policy and allowing the exchange rate to depreciate while using some of the reserve buffer were appropriate responses to the recent fall in global oil prices.
