From Seriki Adinoyi in Jos, 07.09.2010

 

Central Bank of Nigeria (CBN) yesterday disclosed that despite all the challenges faced in Nigerian banking sector,  “our banks today are in better shapes that many of the European banks”.Presenting a paper on The Challenges and Implications of the Banking Sector Reforms in Nigeria, at the SEC 32 of the National Institute for Policy and Strategic Studies (NIPSS), the CBN Governor, Sanusi Lamido Sanusi, said there could be no better platform to discuss the issue of banking reforms in Nigeria that the opportunity he was given in NIPSS.

 

He said Nigeria’s financial system like all other in the world “was however not totally immune to the impact of the global meltdown, which was felt mostly by banks that are largely exposed to the capital market and the energy sector”.He said in spite of the capacity of the financial system to absorb and survive the initial effects of the crisis, the ripples affected all the banks. Sanusi said the banks that were badly affected were those that had huge concentrations in their exposure to capital market and the oil sector, and those that were weak in risk management and poor corporate governance practices.

 

“Consequently, such banks displayed signs of distress, manifested mainly in serious liquidity strain and heavy reliance on the financial support from the CBN through the Expanded Discount Window, ” he said. He said for CBN to intervene and save these institutions from collapse it took some interim measures which include the reduction of Monetary Policy Rate, Cash Reserve Ratio and Liquidity Ratio.

 

He said the CBN also created an expanded discount window to allow additional instruments and permit banks to borrow for 360 days. Explaining why CBN embarked on the reform,  Sanusi said the need to restore public confidence and credibility to the financial system, the CBN and Nigeria Deposit Insurance Corporation (NDIC) embarked on a risk assessment exercise to review, evaluate and determine the quality of the banks’ portfolio, especially their exposure to margin lending and the oil and gas sector.

 

(Source:ThisDay)