The Central Bank of Nigeria (CBN) has announced that the capital base of Deposit Money Banks (DMBs) and their cash positions remain strong.
CBN also certified financial sector indicators, banks’ liquidity positions, and the Capital Adequacy Ratios (CARs) as okay while announcing a decline in Non-Performing Loans (NPLs), also called bad loans.
The apex bank said restraint in NPLs followed improved risk management practices in the lenders with the industry liquidity ratio growing from 41.39 percent as at end-October 2021 compared with 35.56 percent at the end of October 2020.
A member of the CBN-led Monetary Policy Committee (MPC), Aliyu Ahmed, confirmed the banking sector position in his notes at the last MPC meeting posted on the CBN’s website.
Ahmed revealed that the average industry for the Nigerian banks stood at 15.20 percent at the end of October 2021 from 14.98 percent in the previous month.
The CAR position is well above the 10 percent regulatory minimum.
The NPLs were 5.29 percent at end-October 2021 compared with 5.43 percent at end-September 2020. Total credit increased by N4.10 trillion or 21.12 percent year-on-year, due largely to the increase in the industry funding base as well as the CBN’s directive on Loans to Deposit Ratio (LDR).
The LDR policy is used to assess a bank’s liquidity by comparing a bank’s total loans to its total deposits for the same period.
On external sector performance, Ahmed said the gross external reserves stood at $41.41 billion as of November 18, 2021, compared with $41.34 billion in October 2021, a moderate increase of 0.07 percent, attributed to receipts from third parties, as well as proceeds from Royalties and oil-related taxes.
