The Deputy Governor, Financial System Stability Directorate of the Central Bank of Nigeria (CBN), Mrs. Aisha Ahmad and the Deputy Governor, Economic Policy Directorate, CBN, Dr. Kingsley Obiora have disclosed that the banking system remains resilient, stating that the industry’s total assets grew by 22.07 per cent from N53.64 trillion in May 2021, to N65.48 trillion as of June this year.
They both stated this their personal statement during the last Monetary Policy Committee (MPC) meeting held in July.
In her contribution, Ahmad revealed that the total customer deposits in banks grew to N42.03 trillion in the same year under review.
She said: “Key industry aggregates also continued their year-on-year upward trajectory with total assets rising to N65.48 trillion in June 2022 from N53.64 trillion in June 2021, while total deposits rose to N42.03 trillion from N33.85 trillion over the same period.”
“Gross credit has maintained an upward trajectory since 2019, rising by N5.02 trillion between June 2021 and June 2022 with significant growth in credit to manufacturing, general commerce and oil and gas sectors. This notable increase was achieved amidst continued decline in non-performing loans ratio from 5.3 per cent in April 2022 to 5.0 per cent in June 2022. “
She added that results of stress tests on banks showed the resilience of the financial institutions’ solvency and liquidity ratios in response to potential severe macroeconomic shocks.
She, however stated that the central bank must remain vigilant to proactively manage probable macro risks to the financial system such as lingering spillover effects of the pandemic, winding down industry forbearance portfolio, and other risks to financial stability such as exchange rate, operational and cyber security risks.
“The monetary authority must act to better anchor elevated inflation expectations of economic agents following months of rising inflation and recent multiple shocks. Interventions and continued funding of the real sector give room for tightening the monetary policy stance to better anchor inflation expectations, mitigate demand driven inflation and ultimately preserve output gains.
“More importantly, the evolution of consumer prices in recent months and the uncertain short-term outlook present credible grounds to raise the policy rate,” she added.
On his part, Obiora stated that at 4.95 percent, non-performing loans in the sector have gone below the regulatory threshold of five per cent.
“The financial soundness indicators showed that the banking system remained sound, stable, and resilient. Total assets of the banking industry grew month-on- month by 22.07 per cent from N53.64 trillion in May 2021 to N65.48 trillion in June 2022, driven by balances with CBN/banks, OMO bills, and credit to the real sector of the economy.”
He added: “Consequently, the total flow of credit to the economy increased by 22.78 per cent or N5.02 trillion from N22.04 trillion in June 2021 to N27.06 trillion in June 2022 to various sectors of the economy, including Oil and Gas, Manufacturing, General, Governments, and General commerce.
“The industry Non-Performing Loans (NPLs) ratio was 4.95 per cent at the end of June 2022 compared with 5.70 per cent at the end of June 2021, which was below the prudential maximum of 5.0 per cent.
“The year-on-year downward trend was attributable mainly to write-offs, restructuring of facilities, Global Standing Instruction (GSI), and sound credit risk management by banks. Furthermore, the monthly average Open Buy Back (OBB) and Inter-Bank rates, fluctuated within the asymmetric corridor and increased from 9.39 and 8.38 per cent in May to 10.89 and 11.10 per cent in June 2022. “The increase reflects a tight banking liquidity condition, which could help rein in inflation and safeguard financial system stability.
“Amid stable and resilient banking system stability, significant headwinds remain in the economy. Inflationary pressures continued to surge as headline inflation increased to 18.60 per cent in June 2022 from 17.71 per cent in May 2022, driven by rising food and core components,” he added.