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Emefiele CBN

Be careful in relaxing banks’ prudential ratios—Expert warns CBN

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Leading financial analyst, Dr. Ken Igboanugo has cautioned the Central Bank of Nigeria (CBN) not to be carried away by the observed strength, capital adequacy and liquidity of Nigerian banks even at the heat of recession.

Prudential ratios are used by banks and regulatory authorities to monitor and determine the stability of the banks’ finances. They include capital adequacy and liquidity, among others.

Igboanugo argued that whereas it takes time to build strength, it does not take much to collapse a built trust, meaning that “With Nigerian banks’ prudential ratios ranging from 10 to 16 per cent depending on the status of the financial institution, the regulators should not relax the rules to limit chances of vulnerability”.

“Even though the international standard and practice stipulated eight per cent, and that banks in Nigeria made excess provision for the uncertainty that is now rocking the economy is not enough because we had had serious cases where banks cook their books in connivance with external auditors”.

“Let us not forget in haste, the experiences of defunct Oceanic Bank, Fin Bank and Intercontinental Bank amongst others during the Mallam Lamido Sanusi administration at CBN” Igboanugo recalled.

However, while the Central Bank of Nigeria has been reiterating that no bank in Nigeria is distressed, the Nigeria Deposit Insurance Corporation (NDIC) corroborated this at its seminar for Business Editors and Finance Correspondents, in Kaduna State, at the weekend.

The financial expert frowned at the position of the NDIC in advising the CBN in deliberately relaxing its stringent prudential supervisory tools imposed on banks over the years as a measure to maintain financial stability, liquidity and boost cash flow in the banking system, particularly in period of economic recession.

Business Hilights recalls that in recent times, there had been series denials and counter denials on the liquidity status of some banks (names with held) even though the CBN had repeatedly said all Nigerian banks are liquid.


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