Nigerian Banks CEOs Jittery As CBN’s Special Examiners Scrutinise Their Accounts Over N20trn Owner Related Loans.

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Most Nigerian banks are in a state of serious fears as the new Central Bank of Nigeria (CBN) Governor Olayemi Cardoso moves to wield his regulatory oversight by scrutinizing the over N20 trillion of loans taken by bank insiders, major owners and shareholders.

Cardoso, it was learnt, has sent out sets of special examiners who are currently digging into the books of the major banks.

Close to the end of the first quarter of 2024, many banks have still not released their Full Year 2023 financials.

This is because Cardoso has decided to stop all the financial shenanigans going on in the banking sector.

Banks cannot make public their audited reports and accounts without prior and final approval of the CBN.

Most of the bank owners and insiders are said to have major outstanding non-performing loans, and a lot are foreign currency FCY denominated too. The loans have now ballooned with the value of the naira down 70% against the dollar since June 2023.

Fitch Ratings in a February 15, 2024 rating action on 12 Nigerian Banks says it expects the banking sector’s impaired loans (Stage 3 loans) ratio to increase at a faster pace than before the devaluation.

The devaluation itself has caused already material FCY-denominated problem loans (Stage 2 and Stage 3 loans; predominantly oil and gas sector loans) to have inflated relative to gross loans and core capital and accentuated credit concentration risks, according to Fitch.

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Fitch put FCMB and Union Bank of Nigeria (UBN) on rate watch negative (RWN) while downgrading Ecobank Nigeria entirely.

“The RWN on FCMB and UBN reflects our view that, following the devaluation, the banks are at risk of breaching Capital requirements. This is due to further capital pressure emanating from further naira depreciation and credit losses considering already high Stage 2 and Stage 3 loans (end-3Q23: 31% of gross loans for FCMB; currently estimated at over 40% for UBN),” Fitch said.

Cardoso who is a professional Central Bank Governor in the mold of US Fed Chair Jerome Powell has refused to be compromised by any sort of inducements from the banks.

Former CBN Governor, Godwin Emefiele who is currently under trial for corruption was close to a number of bank owners and in some cases flew in their private jets while turning a blind eye to any alleged infractions.

That engendered a culture of impunity in a lot of the banks which Cardoso is working hard to clean up.

Nigerian banks have been under intense criticism in recent times for alleged complicity in economic crimes. The Economic and Financial Crimes Commission (EFCC) has estimated that some 70 per cent of financial crimes in the country could be traced to the banking sector.

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Investors have largely been underweight banking stocks since the beginning of the year as Governor of the CBN, Yemi Cardoso, signaled it would not be business as usual at the Apex bank.

The Nigerian Exchange (NGX) Banking Index is the worst performing index on the Exchange and has returned +8.07% year-to-date compared to other indices such as Insurance +12.28%, Industrials +77.1%, Oil & Gas +23.72% and Consumer Goods +49.59% and the NGX-All Share Index as a whole which is up 40.54%.

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