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Indicators that show Nigerian banks ‘are healthy’- CBN

Key highlights

  • Nigerian central bank governor confirms banks are performing well within prudential guidelines, amid global banking crises.
  • Financial soundness indicators including Capital Adequacy Ratio, Non-Performing Loans ratio, Liquidity Ratio, and Return on Equity are cited as evidence of the strength of the Nigerian banking system.
  • The governor emphasizes that the central bank prioritizes depositors over shareholders, and they would rather dispose of shareholders than make depositors lose money.
  • Despite the healthy indicators, ongoing global economic uncertainty and potential fluctuations in financial markets mean it is important for the central bank to continue to assess and manage any potential risks proactively.

Godwin Emefiele, the governor of Nigeria’s central bank has stated that Nigerian banks are sound and performing within prudential guidelines, amidst cases of banking crisis in some countries around the world.

He addressed these concerns at the recently concluded monetary policy committee meeting held on on Tuesday, March 21st.

The meeting resulted in members voting to keep increasing its benchmark interest rates, this time to 18% from 17.5%. The decision effectively means lending rates will likely continue to rise as lenders reprise their loans to reflect the direction of the apex bank.

But as the central bank continues its hawkish policy of raising rates, critics have pointed to a potential effect of the policy on the banking sector. They cite the global crisis that has rocked banks in the US, UK, and Europe as a pointer to what could happen when central banks raise rates without considering the potential effect on the soundness of the financial system.

In response, Godwin Emefiele stated that an assessment has been conducted in the wake of the Silicon Valley Bank failure. He also stated that at the end of the assessment, prudential baking indicators confirmed that Nigerian banks were healthy.

  • “The MPC hence took time out to discuss the recent bank failures in the US and Switzerland, an event that occurred following the persistent interest rate hikes in the US, and how this has adversely impacted the broad portfolio of banks in the US.”
  • “It noted that whereas MPR was increased by 500 basis points in Nigeria, from 12.5 per cent in 2022 to 17.5 per cent in January 2023, the Financial Soundness Indicators (FSIs) in Nigeria shows that the Nigerian banking system remain resilient due largely the stringent prudential guidelines put in place by the CBN which has resulted in a strong build-up of not only the Cash Reserve Ratio (CRR) in Nigeria, but also the Liquidity Ratio and Capital Adequacy Ratio.”

These are the Financial Soundness Indicators that he cited.

  • Capital Adequacy Ratio (CAR) stood at 13.7% (within the target of 10%-15%)
  • Non-Performing Loans (NPLs) ratio of 4.2% (better than the upper limit of 10%)
  • Liquidity Ratio (LR) of 43.1%, as of February 2023.
  • The loan-to-deposit ratio of 52% as of February 2023
  • The average Return on Equity for banks is 21%
  • 25% of profits of smaller banks are kept in statutory reserves while larger banks keep 10%.

Depositors own banks

Another poignant comment made by the central bank governor was to state that the apex bank had always viewed banks from the position of depositors and not shareholders.

According to him, depositors stood to lose more than shareholders of banks and as such, they will always prioritize depositors over shareholders.

“We will rather dispose of with shareholders than make depositors than make depositors lose money” he concluded.


Despite the healthy indicators, it is still important to remain vigilant and monitor the banking sector for any potential risks or challenges that may arise.

The ongoing global economic uncertainty and potential fluctuations in the financial markets could impact the Nigerian banking sector, and it is important for the central bank to continue to assess and manage any potential risks proactively.

Most of the major banks are also yet to release their financials so the central bank’s governors comment will still need to be assessed when results are available.

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