06.29.2010 

 

Standard & Poor’s (S&P) has said that Nigerian banks continue to look extremely risky, despite a bailout of the sector last year.Reuters quoted the Managing Director for Financial Institutions at S&P, John Gibling, as telling a Nigeria conference yesterday :”The Nigerian banking system is very high risk.”

 

 

Gibling said: “The ratings we have for the banks are in the single B category. It is very very low level compared to most banks in the world. We continue to see the Nigerian banking system as very high risk.” S&P also said that the Nigerian banking and regulatory reform has a long way to go. It however, applauded the CBN Governor, Sanusi Lamido Sanusi, and his predecessor,  Professor Chukwuma Soludo for pushing through banking sector reforms, pointing out that the bailout has been a “very, very brave move” which had prevented a catastrophe.Gibling further said: “What Nigerian banks really need is to continue improving their risk management culture, particularly in developing strong asset quality measures.”

 

 

He also pointed out that the banks are very dependent on short-term funding and need to develop more long-term funding, which would help them in funding more long-term financing projects for the economy. Gibling added that proper risk management is needed to improve the fundamentals of Nigerian banks and also boost investor confidence.The CBN has in the past one year admitted the enormity of the challenges in the banking sector, which necessitated its intervention in the banks in August and October last year, through changes in the executive management of some banks and the injection of fresh N620 billion.

 

 

The solutions to the crisis, as contained in the reform programme, include the enthronement of proper risk management in the banks; effective supervision of the banking system and quick recapitalisation of the institutions.The establishment of the asset management corporation of Nigeria (AMCON), which is expected soon, is believed will resolve most of the causes of high risk in the sector. MCON is billed to buy over the bad assets of the banks and clean up their books for fresh investors to participate and invest in them.

 

(Source:ThisDay)