Banking
CBN Stress Test Shows Weak Capital Signs in Banks
By Modupe Gbadeyanka
A Central Bank of Nigeria (CBN) stress test has shown that only large banks will stay above the regulator’s capital adequacy ratio threshold if the non-performing loans levels of the Deposit Money Banks (DMBs) should rise by 50 percent, Punch is reporting.
The results of the stress test were contained in the CBN’s latest Financial Stability Report posted on its website on Thursday.
According to the report, the end-June 2017 banking industry stress test, which covered 20 commercial and four merchant banks, was conducted to evaluate the resilience of the banks to credit, liquidity, interest rate and contagion risks (shocks).
The banking industry was categorised into large banks (those with assets up to N1tn or above); medium banks (those with assets more than N500bn but less than N1tn); and small banks (those with assets up to N500bn or below).
The stress test results stated, “The stress test showed that only large banks could withstand a further deterioration of their NPLs by up to 50 per cent. However, none of the groups withstood the impact of the most severe shock of a 200 per cent increase in the NPLs as their post-shock CARs fell below the 10 per cent minimum prudential requirement.
“The impact of the severe shocks on the banking industry, large, medium and small banks will result in significant solvency shortfall of 15.21, 9.78, 93.42 and 17.53 percentage points from the regulatory minimum of 10 per cent CAR, amounting to N2.77tn, N1.54tn, N0.98tn and N0.25tn, respectively.”
According to the CBN report, the average baseline Capital Adequacy Ratios for the banking industry, large, medium and small banks at the end of June 2017 stood at 11.51, 13.13, -6.71 and 13.54 per cent, respectively.
These represented a decline of 3.27, 2.34 and 19.46 percentage points for the banking industry, large and medium banks, respectively from the position as at end-December 2016.
However, the small banks group grew by 10.40 percentage points from 3.14 to 13.54 per cent
The CBN said the decline in the CARs was attributable to the challenges in the oil and gas sector coupled with the slow recovery in the domestic economy, which resulted to a rise in the NPLs and capital deterioration.
In the sectoral credit concentration risk stress test, the breakdown of banking industry’s total credit by sector showed that, oil and gas sector accounted for 28.83 per cent of the industry credit, while manufacturing, general, information and communications, government and others accounted for 13.76, 8.82, 4.94, 8.53 and 35.12 per cent, respectively at end-December 2016.
The report added, “The results of the stress test of default in exposure to oil and gas sector showed that the banking industry and peered groups, with the exception of medium banks, withstood up to 20 per cent default as their post-shock CARs remained above 10.00 per cent – industry (10.74 per cent), large banks (12.30 per cent) and small banks (13.34 per cent).
“Under a more severe shock of 50 per cent default, only small banks had CARs above 10.00 per cent (12.30 per cent). This showed that banking industry, large and medium banks were more exposed to the credit risk in the oil and gas sector than the small banks.”
The CBN liquidity stress test showed that after a one-day run, the liquidity ratio of the industry declined to 31.5 per cent from the 48.1 per cent pre-shock position, and to 11.8 and 7.9 per cent after a five-day and cumulative 30-day run, respectively.
According to the report, the asset quality of commercial banks declined in the first half of 2017.
The ratio of the NPLs to gross loans increased by 2.2 and 4.3 percentage points to 15.0 per cent at end-June 2017 compared with the levels at end-December 2016 and end-June 2016, respectively.
In his reaction under the Governor’s Statement on the FSR, the CBN Governor, Godwin Emefiele, said, “Reflecting the recession in the first half of 2017, there was noticeable deterioration in banks’ loan portfolios, especially exposures to the oil and gas sector and foreign currency denominated credit.
“To maintain financial system stability, efforts have been intensified to proactively engage operators to effectively manage the associated risks. Also, a framework for the establishment of private asset restructuring companies to acquire non-performing loans from banks and other financial institutions will be released in due course.”
The Deputy CBN Governor, Financial System Stability, Dr. Joseph Nnanna, stated that the regulatory attention was currently focused on ensuring an improvement in the quality of banks’ assets as well as ensuring that the banks contribute effectively to the real sector.
“The disruptions experienced in the economy with declining oil prices and government revenue resulted in an increase in the non-performing loans in the banking industry. The CBN will continue to monitor developments and initiate measures to limit contagion and ensure that financial institutions remain safe and sound,” he added.
The results of the CBN’s stress test were in line with the Article IV Consultation report by the International Monetary Fund, which highlighted the risks the banking sector faced, particularly with regards to solvency ratios of “four small and medium-sized undercapitalised banks,” Afrinvest, a Nigeria-based investment and research firm, said in a research note.
It noted that some of the “small and medium-sized banks are kept afloat through continuous recourse to the CBN’s lending facilities”
The IMF report stated that banks needed to raise their capital buffers hence, the CBN’s directive on dividend payment was a welcome development, while also calling for a broad review of asset quality to unmask potential capital needs.
By Adedapo Adesanya
The Senate has demanded detailed explanation from the Central Bank of Nigeria (CBN) over the alleged non-remittance of N1.44 trillion in operating surplus.
The Senate Committee on Banking, Insurance and Other Financial Institutions, chaired by Mr Tokunbo Abiru, opened its statutory briefing with a firm call for transparency at the apex bank, noting that the Auditor-General’s query on the unremitted funds required a full, clear and documented response, insisting that public trust in monetary governance depended on strict accountability.
While acknowledging the CBN’s achievements in stabilising the foreign exchange market and reducing inflation, Mr Abiru underscored that such progress must be accompanied by institutional responsibility.
He stated the Senate expected the CBN to explain the circumstances surrounding the query, outline corrective steps taken and reveal safeguards against future lapses.
This came as the Governor of the central bank, Mr Yemi Cardoso, appeared before the senate committee and offered an extensive review of economic conditions, asserting that Nigeria was experiencing renewed macroeconomic stability across major indicators.
Mr Cardoso attributed the progress to bold monetary reforms, foreign-exchange liberalisation and disciplined liquidity management implemented since mid-2025.
According to him, headline inflation had declined for seven consecutive months, from 34.6 per cent in November 2024 to 16.05 per cent in October 2025, marking the steepest and longest disinflation trend in over a decade.
Food inflation accruing to him also slowed to 13.12 per cent, supported by improved supply conditions and exchange-rate predictability.
The CBN governor described the foreign-exchange market as fundamentally transformed, adding that speculative attacks and arbitrage opportunities had largely disappeared.
According to him, the premium between the official and parallel markets had fallen to below two per cent, compared to over 60 per cent a year earlier. As of November 26, the naira traded at N1,442.92 per dollar at the Nigerian Foreign Exchange Market, stronger than the N1,551 average recorded in the first half of 2025.
He also announced a sharp rise in external reserves to $46.7 billion, the highest in nearly seven years and sufficient to cover over ten months of imports.
Diaspora remittances, he noted, had tripled to about $600 million monthly, while foreign capital inflows reached $20.98 billion in the first ten months of 2025, 70 per cent higher than in 2024 and more than four times the 2023 figure.
Cardoso further confirmed that the CBN had fully cleared the $7 billion verified FX backlog, restoring investor confidence and strengthening Nigeria’s balance-of-payments position.
On banking-sector stability, he reported that recapitalisation efforts were progressing smoothly. Twenty-seven banks had already raised new capital, with sixteen meeting or surpassing the new regulatory thresholds ahead of the March 31, 2026 deadline, highlighting improvements in ATM cash availability, digital-payments oversight and cybersecurity compliance.
Despite the positive indicators, the Senate sought clarity on several policy decisions.
Mr Abiru pressed for explanations on the sustained 45 per cent Cash Reserve Ratio (CRR), the 75 per cent CRR applied to non-Treasury Single Account public-sector deposits, FX forward settlements, mutilated naira notes in circulation, excessive bank charges, failed electronic transactions and the compliance of CBN subsidiaries with parliamentary oversight.
He also requested an update on the activities of the Financial Services Regulatory Coordinating Committee, arguing that stronger inter-agency cooperation was necessary to maintain public confidence.
The session later moved into a closed-door meeting.
By Modupe Gbadeyanka
About N3.6 trillion has been repaid to the Central Bank of Nigeria (CBN) by the Asset Management Corporation of Nigeria (AMCON) since its inception in 2010.
This information was revealed by the chief executive of AMCON, Mr Gbenga Alade, during a media parley to update the press on the activities of the agency.
Mr Alade said at the moment, the organisation still owes the central bank about N3 trillion for toxic assets of banks in the country.
He praised the organisation for its asset recovery drive, stressing that when compared with others across the world, Nigeria has done well.
“It is important to stress that the corporation has done tremendously well, especially when compared to other notable government-owned Asset Management Corporations around the world.
“Based on the balance at purchase, AMCON outperformed other Asset Management Corporations all over the world by achieving over 87 per cent in recoveries despite the unique challenges associated with debt recovery in Nigeria.
“The Malaysian Danaharta, which is adjudged one of the best performing Asset Management Corporation’s, only achieved 58 per cent. The Chinese Asset Management Corporation, despite its stricter laws, achieved just 33 per cent.
“Only the Korean Asset Management Corporation (KAMCO), South Korea, has achieved more recoveries than AMCON, with about 100 per cent. This was due to their brute force with which they chased the obligors.
“Despite KAMCO’s recovery records, the agency is still operational to date with slight realignments in its mandate.
“Other noted Asset Management Corporations that have transitioned into a perpetual institution of the various governments include, China Asset Management Company, Federal Deposit Insurance Corporation (FDIC) USA, and KFW Germany.
“So, gentlemen, without sounding immodest, AMCON has done well, and we will not relent until all the outstanding debts are fully realized,” Mr Alade stated.
On the financial performance of AMCON, he said last year, the firm posted a revenue of N156.25 billion and operating expenses of N29.04 billion, while for the 2025 fiscal year should be a revenue of N215.15 billion and operating expenses of N29.06 billion.
By Modupe Gbadeyanka
One of the non-interest banks in Nigeria, The Alternative Bank (AltBank), has opened a new branch in Effurun, Delta State.
The new office will serve the Edo-Delta region and provide purposeful banking and real financial empowerment for individuals, entrepreneurs, and businesses, a statement from the firm stated.
The lender disclosed that the Effurun branch is a bold move in its mission to reshape banking in Nigeria.
The launch was graced by key dignitaries, including the Ovie of Uvwie Kingdom, Emmanuel Ekemejewa Sideso Abe I; the Chairman of Uvwie Local Government, Anthony O. Ofoni, represented his vice, Andrew Agagbo; and the Special Adviser to the Governor of Delta State on Community Development, Mr Ernest Airoboyi; amongst others.
The Divisional Head for South at The Alternative Bank, Mr Chukwuemeka Agada, emphasised the institution’s commitment to Warri and its surrounding communities.
“By establishing a presence here, we are initiating a transformation in the way banking serves the people of Delta. Our purpose-driven approach ensures that customers’ financial goals are not just met but exceeded,” he stated.
“This branch represents our pledge to empower Warri’s dynamic businesses and families, providing them with the tools to grow without compromise,” Mr Agada added.
“We understand the heartbeat of this community, and we are excited to integrate our bank into the fabric of this dynamic region,” he stated further.
On his part, the representative of the Ovie, Mr Samuel Eshenake, challenged the bank to facilitate development and employment within the Effurun community.
The Regional Head for Edo/Delta at The Alternative Bank, Mr Akanni Owolabi, embraced this challenge, pledging that the bank will work sustainably to drive local commerce.
“At The Alternative Bank, we are committed to being an active partner in the development of Effurun. We see this branch as a catalyst for creating opportunities, driving employment, and supporting the growth of local businesses.
“Our mission is to empower this community, ensuring that every step forward is one of progress, prosperity, and shared success.”
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