Business

Banks have significant cash reserve to provide liquidity backstops —CBN

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2 years ago

By Chima Nwokoji | Lagos

The Central Bank of Nigeria (CBN) has assured that Deposit Money Banks (DMBs) in the country have enough cash saved in their vaults to take care of financial obligations that may arise in the course of their daily business activities.

This was made known by members of the Monetary Policy Committee (MPC) of the CBN.

The Monetary Policy Committee (MPC) held its first meeting for 2023 on January 23 and 24 as optimism of a rebound in global output recovery waned considerably, giving room for increased concerns of a likely global recession in 2023.

The trio of Adeola Festus Adenikinju, Aishah Ahmad, Ahmed Aliyu, among others, in their personal statements available on the CBN website, noted that the results of the bank’s stress tests showed resilience of banks’ solvency and liquidity ratios in response to potential severe macroeconomic shocks.

However, they agreed that CBN must remain vigilant to proactively manage likely macro risks to the financial system arising from spillover effects of global headwinds and domestic vulnerabilities, in view of the financial system’s strategic role in driving sustainable economic recovery.

According them, various Financial Soundness Indicators (FSI) showed that the banking systems remain safe, sound and resilient, as all the FSIs were within the prudential requirements and compared well with comparator countries.

Non-Performing Loans (NPLs) ratio fell from 4.9 percent in September 2022 to 4.2 percent in December 2022. Capital Adequacy Ratio remained unchanged at 13.8 percent. Return on Equity (ROE) and Return on Assets (ROA) both rose by 20.2 percent and 1.6 percent in December 2022, from 18.4 and 1.5 percent in September 2022, respectively.

The committee members further stated that total operating cost to total operating income declined from 74.6 percent in September 2022 to 74.1 percent in December 2022.

“All measures of industry aggregates: assets, deposits and credit rose year-on-year. Total assets of the banking industry grew by N14.36 trillion or 24.24 percent from N59.24 trillion in December 2021 to N73.59 trillion in December 2022, driven by balances with CBN/banks, investments and credit expansion to the real sector.

“Similarly, in December 2022, a total of 130,854 new credits valued at N947.46 billion were granted to various customers,” they stated.

In Aishah Ahmad’s submission, data provided by bank staff indicated stability in broad soundness indicators and an unprecedented improvement in asset quality, even as credit to the private sector continued to grow.

Key industry aggregates also continued their year-on-year upward trajectory

with total assets rising to N73.59 trillion in December 2022 from N59.24 trillion in

December 2021, while total deposits rose to N45.50 trillion from N38.42 trillion over the same period.

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