Some major Nigerian banks are in a state of panic as Olayemi Cardoso, the governor of Central Bank of Nigeria, CBN governor Olayemi Cardoso has began
Some major Nigerian banks are in a state of panic as Olayemi Cardoso, the governor of Central Bank of Nigeria, CBN governor Olayemi Cardoso has began making moves to wield his regulatory oversight by scrutinizing the over N20 trillion loans taken by bank owners and shareholders.
Cardoso has sent out some special examiners who are currently digging into the books of these banks.
Tired of the sleaze that has gone on in banks unchecked for so long, Cardoso decided to put a stop all financial shenanigans going on in the banking sector.
As is the custom, the apex bank requires banks to make public details of their financials in the previous year. But it is already cose to the end of the first quarter of 2024 and many banks are yet to release their Full Year 2023 financials.
Banks cannot make public their audited reports and accounts without prior and final approval of the CBN.
Most of the bank owners and shareholderd are said to have major outstanding non-performing loans, and a lot are foreign currency denominated too. The loans have now ballooned with the value of the naira down 70 per cent against the dollar since June 2023.
In a recent rating of 12 Nigerian Banks, Fitch Ratings, a leading provider of credit ratings, commentary and research for global capital markets, said it expects the banking sector’s impaired loans, otherwise known as stage 3 loans, ratio to increase at a faster pace than before the devaluation.
The devaluation itself has already caused forex denominated problem loans (Stage 2 and Stage 3 loans; predominantly oil and gas sector loans) to have inflated relative to gross loans and core capital and accentuated credit concentration risks.
Fitch put First City Monument Bank, FCMB and Union Bank of Nigeria, UBN, on rate watch negative, RWN, while downgrading Ecobank Nigeria entirely.
“The RWN on FCMB and UBN reflects our view that, following the devaluation, the banks are at risk of breaching Capital requirements. This is due to further capital pressure emanating from further naira depreciation and credit losses considering already high Stage 2 and Stage 3 loans (end-3Q23: 31% of gross loans for FCMB; currently estimated at over 40% for UBN),” Fitch said.
Cardoso is now wielding the big stick and has refused to be compromised by any sort of inducements from the banks.
Disgraced CBN Governor Godwin Emefiele who is currently under trial for corruption was a close ally to a number of these bank chiefs and in some cases flew in their private jets. He not only turned a blind eye to any of their infractions, he helped himself with the ownership of some banks without going through due process.
This engendered a culture of impunity in a lot of the banks which Cardoso is working hard to clean up.
Nigerian banks have been under intense criticism in recent times for alleged complicity in economic crimes.
The Economic and Financial Crimes Commission, EFCC has estimated that some 70 per cent of financial crimes in the country could be traced to the banking sector.
Recently, Cardoso had blamed the devaluation of the naira to the bad behaviours of some new generation bank chiefs.
These bad behaviours include round tripping, money laundering, foreign exchange manipulations.
Cardoso vowed to make any bank MD found culpable, to face the music after the conclusion of his investigations on them and their activities to serve as a deterrence.
Investors have largely been underweight banking stocks since the beginning of the year as Cardoso, signaled it would not be business as usual at the Apex bank.
The Nigerian Exchange, NGX, Banking Index is the worst performing index on the Exchange and has returned +8.07% year-to-date compared to other indices such as Insurance +12.28%, Industrials +77.1%, Oil & Gas +23.72% and Consumer Goods +49.59% and the NGX-All Share Index as a whole which is up 40.54%.
