By Emeka Anaeto, Business Editor

At the backdrop of the mounting macroeconomic pressures, the Central Bank of Nigeria, CBN, has indicated that the banking industry is sound and secure.

In its monthly economic report released last week the apex bank stated: ‘‘The banking industry remained safe, sound and resilient, as key indicators were within prudential benchmarks’’. 

Buttressing this position the report noted some key soundness parameters such as Capital Adequacy Ratio (CAR), Asset Quality measured by Non-Performing Loans (NPL), as well as the Industry Liquidity Ratio (LR), indicating that all are within safety range.

It stated: ‘‘The banking system’s Capital Adequacy Ratio (CAR) remained above the 10.0 per cent benchmark for banks with national/regional authorisation’’.

The report added that the CAR rose slightly by 0.2 percentage point to 13.0 per cent in May 2023, from the level at end-April, driven by a marginal increase in total qualifying capital over movements in total risk-weighted assets. On the quality of banks’ assets, the report stated: ‘‘The banks’ asset quality, measured by the ratio of non-performing loans (NPL) to total loans, increased by 0.1 percentage point to 4.5 per cent, but remained below the prudential benchmark of 5.0 per cent’’. 

On the industry liquidity level, it stated: ‘‘The Industry Liquidity Ratio (LR) was above the minimum regulatory benchmark of 30.0 per cent, as it increased by 11.6 percentage points to 73.8 per cent, compared with 62.2 per cent in the preceding month. 

‘‘Banking system liquidity increased in the review period. The average net industry balance increased by 39.5 per cent to ₦330.60 billion from ₦236.99 billion in the preceding month. 

‘‘The increased liquidity position was influenced by injections via the Federation Account Allocation Committee (FAAC), at ₦655.93 billion, as well as through NTBs and CBN bills maturities at ₦324.43 billion and ₦85.00 billion, respectively’’.

Further indication of the industry soundness was shown in the positions at the apex bank’s lending window where it cushions banks’ liquidity stress. 

Banks borrow through the window in the event they have cash challenges while they also deposit excess cash with the CBN through the window in the event of liquidity adequacy or overflow.

Banks borrowing for this purpose reduced drastically during the period while their deposits increased substantially.

It stated: ‘‘At the CBN Standing Facility window, lending declined to ₦714.10 billion, from ₦4.1 trillion in the preceding month, with an average daily request of ₦35.70 billion, relative to ₦256.66 billion in April. The outcome was a result of the increased liquidity in the banking system. 

‘‘Conversely, deposits increased to ₦450.25 billion, with an average daily placement of ₦21.44 billion, compared with ₦224.29 billion with an average daily placement of ₦14.02 billion in the preceding month. 

‘‘The applicable rates for the standing deposit facility and standing lending facility increased by 50 basis points to 11.50 and 19.50 per cent, respectively, following the hike in the policy rate by 50 basis points to 18.50 per cent in May’’.