Daily Independent (Lagos)
Otei Oham
28 November 2008
Abuja — Deputy Governor of the Central Bank of Nigeria (CBN), Tunde Lemo, on Thursday announced that the nation's 24 banks' credit has hit over N7 trillion as at October.
Lemo said at an interactive session with House of Representatives Committee on Capital Market headed by Aliyu Wadada (PDP Nasarawa) that the current financial crisis in the capital market has not affected the banking system operations.
"We did our survey and found out that out of the portfolio the total credit of banks as at October was in excess of N7 trillion."
Responding to questions on the impact of the economic meltdown on the banking system, Lemo assured that adequate measures, including the recapitalisation exercise in the banking sector has positioned the Nigerian banks in a safe position against such crisis.
He maintained that despite the huge financial commitment of about 60 to 65 per cent investment of the total capital market, the consolidation has positioned all Nigerian banks against any major setback in time of crisis.
According to him, in the quest to mitigate the effect of the meltdown in the capital market, the apex bank has so far released N1 trillion into the capital market as well as ease the liquidity ratio from 40 per cent to 30 per cent and reduce the cash reserve from six per cent to three per cent.
Lemo disclosed that the Nigerian banks' share capital has also risen from less than N300 billion before the consolidation exercise to N2.7 trillion after the consolidation exercise initiated in 2005.
According to him, "in the pre consolidation, the entire 89 deposit money banks had less than N300 billion initial capital but as we speak have over N2.7 trillion share capital.
"Even if, God forbids, all their investment in the capital market is zero and nobody pays and the whole thing is watered and zero which is unlikely, it won't even wipe up to one-third of their capital.
"So, Nigerian banks are not in the same position as the British's banks that have whole average capitalisation of eight to 10 per cent.
"Nigerian banks now have average capitalisation of over 22 per cent and so we don't have any reason to fear. All we need is patience; it would take time but the Nigerian capital market will bounce back.
"Some of the shares may not go back to where they were before but certainly overall the market will bounce back," Lemo added.
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