It seems not cheering news is coming the way of the Nigerian economy soon as a stress test conducted by Dubai-based international investment bank, Arqaam Capital, has indicated that seven of the country’s bank have credit crises and they overcapitalized to the tune of $3.2bn (N1 trillion).
The Arqaam report published in Bloomberg yesterday great conflicted with the Central Bank of Nigeria’s statement last month which gives all the banks in the country clean bill of health.
The report says 2 banks were close to being insolvent and that the Nigeria’s banking industry “is experiencing a full-blown financial crisis” as failed fiscal and monetary policies had led to a credit crunch.
The stress test identified the overcapitalized banks as First Bank of Nigeria, Unity Bank Plc, Diamond Bank Plc, Skye Bank Plc, FCMB Group Plc, Sterling Bank Plc and Fidelity Bank Plc.
Arqaam Capital is a specialist emerging markets investment bank bringing regional and international product offerings to the emerging markets. The company, which is based in Dubai, United Arab Emirates, provides in-depth research on more than 280 listed Middle East and Africa (MEA) companies across 26 countries and 15 sectors, including the largest global coverage of Middle East and North Africa (MENA) equities.
Its primary role is to provide financial intermediation and create investment opportunities for emerging markets investors looking to invest in their own markets and abroad as well as international investors seeking opportunities in target emerging markets.
Moody’s Investors Service said yesterday that Nigeria’s five biggest banks shared common credit challenges related to the economic slowdown. Moody’s expects non-performing loans to increase to about 12 per cent over the next 12 months. The ratio of non-performing loans to total credit rose to 11.7 per cent at the end of June from 5.3 per cent at the end of 2015. The CBN requires banks to keep the measure below five per cent.
The five largest lenders, which together hold 57 per cent of the country’s banking assets, “are able to absorb all losses under our severe stress scenario,” Moody’s said.
It listed Guaranty Trust Bank Plc as showing “the greatest resilience”. The other four largest lenders are: Zenith Bank Plc, Access Bank Plc, United Bank for Africa Plc and First Bank of Nigeria Ltd.
