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Banks scramble for fresh capital as naira weakens further

Rising non-performing loans and imminent fall in naira value 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 by our correspondent 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 by our correspondent showed 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 told our correspondent on Sunday on the condition of anonymity, because he was not officially authorized to speak on the matter.

This came amid predictions by notable economic and financial experts that the naira would hit between 350 and 400/dollar at the official window this year instead of the current rate of 305.”



Source: Punch

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