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CBN's stress test shows 7 Nigerian banks not adequately funded

Mr. Godwin Emefiele, CBN Governor
  • Seven Nigerian banks out of 24 banks are not adequately funded in 2018, according to CBN's latest financial stability report.
  • The stress test is part of CBN's efforts to significantly minimise the impact of risks on the Nigerian financial system.
  • Baseline capital adequacy ratio (CAR) for the banking industry at end-December 2018 was 15.26%, indicating a 3.18% points increase from the 12.08% recorded at end-June 2018.

Nigeria's central bank (CBN) has said seven commercial banks in the country failed stress test in adequate funding at the end of 2018.

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In a financial stability report published on its website on Thursday, October 17th, the apex bank revealed that in less than 30-day period analysis, seven Nigerian banks were not adequately funded, while in the 31-90 day bucket, nine banks had funding gaps.

Overall the cumulative position for the industry showed an excess of N4.8 trillion assets over liabilities, CBN said in a report seen by Business Insider SSA.

The banking regulator did not mention the names of the seven of the banks.

Here, a stress test is used to test the resilience of financial institutions against any future situations. It is done to help check the level of a bank's assets, as well as evaluate internal processes and controls.

  • Baseline capital adequacy ratio (CAR) for the banking industry at end-December 2018 was 15.26%, indicating a 3.18% points increase from the 12.08% recorded at end-June 2018.
  • The baseline banking industry NPL ratio was 11.64% at end-December 2018, showing a slight improvement of 0.81% points from 12.45% recorded at end-June 2018.
  • The stress test result revealed that after a one-day run scenario, the liquidity ratio for the industry declined to 34.69% from the 51.87% pre-shock position and to 17.55 and 13.48% after a 5-day and cumulative 30-day scenarios, respectively.
  • The result also revealed that under 5-day and cumulative 30-day run scenarios on the banking industry, liquidity shortfalls declined to N1.58 trillion and N1.98 trillion respectively.
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