Banks Jostle for Fresh Capital as Forex Crisis Worsens

February 10, 2017
forex Black Market

Banks Jostle for Fresh Capital as Forex Crisis Worsens

By Dipo Olowookere

The worsening state of the Naira and rising non-performing loans have put banks in a precarious position and needing to raise fresh capital in a distressed economy.

Palpable fear has gripped the chief executives of many large-tier and mid-tier Deposit Money Banks as an imminent fall in the Naira exchange rate throws up a need for additional capital raising.

Checks show that the Capital Adequacy Ratio of a number of the country’s mid-tier and weak large-tier banks is currently at the threshold stipulated by the Central Bank of Nigeria.

This means that in the absence of additional capital raising, a slight depletion in capital will make a number of the banks to fall below the minimum CAR prescribed by the CBN.

Aside from mounting non-performing loans among the country’s lenders, findings also show that a possible fall in the official exchange rate of the naira would make at least five of the banks to fall below the 16 per cent minimum CAR stipulated by the apex bank.

“The situation is a bit terrible now. Aside from the NPLs that are rising among a number of banks, any fall in the naira-dollar official rate will put many banks in trouble as far as the CBN’s CAR is concerned. This is because many of us are already at the threshold.

“A slight fall in the value of the naira means not less than five banks will sink below the CBN’s CAR,” an executive director in one of the leading banks said on Sunday on the condition of anonymity, because he was not officially authorised to speak on the matter.

Punch

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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