[News] “Nigeria’s digital currency will certainly come into operation by October” Emefiele says as he denies reports that some Nigerian banks are showing signs of distress

Central Bank of Nigeria Governor, Mr. Godwin Emefiele has reacted to reports that some Nigerian banks are showing signs of distress while addressing the health of the Nigerian banking industry.

 

Speaking in Abuja at the end of the Monetary Policy Committee meeting on Tuesday, July 27, Emefiele said the reports making the rounds are fake. He also assured that those responsible for spreading the false reports will be exposed if caught.

 

He said: “Let me say that all those social media messages going round are fake and indeed fraudulent and the CBN is currently doing everything possible to trail those perpetrators who are bent on creating problems to create banking system instability. We hope to unravel those who are behind it and we will bring them to the public if we find them.”

 

He added that the health of Nigerian banks remains strong.

 

He said: “I want to say and I repeat that the strategic health of the Nigerian banking industry remains very strong.

 

“For instance at today’s meeting, data was provided to monetary policy committee members and I will say we reviewed the financial soundness indicators of the Nigerian banking industry. For instance, capital adequacy ratio averages 15.5 per cent.

 

“For the national banks, they are only meant to have 10 per cent. The international banks, those operating international licenses, they are supposed to operate at 15 per cent. If we have an average of 15.5 per cent, we believe the Nigerian banking industry is well capitalised and can meet any shocks if they arise. Secondly, non-performing loans ratio today stands at 5.7 per cent and our prescribed maximum is five per cent even at a time when there’s global crisis. If we have 5.7 per cent instead of five per cent, I think it’s an indication of a sound banking system.

 

“Thirdly, liquidity ratio for the banking industry today is 41.4 per cent. What is expected is a minimum of 30 per cent and if the banks have an average of 41.3 per cent, we believe that’s an indication of sound liquidity in the banking system.

 

“Total assets in the banking industry from the data that we saw today rose from N37.8 trillion in May 2019, two years ago and today total assets of the banking industry N53.6 trillion as at June 2021. Total deposits in banking industry has increased from N22.83 trillion in May 2019 to N33.85 trillion in June 2021. Gross loans have grown from N15.4 trillion in June 2019, to N22.04 trillion in June 2021. Like I said earlier, non-performing loans ratios have dropped from as high as 11.17 per cent in May 2019, to 5.7 per cent in June 2021, against a maximum threshold of five per cent.

 

“So, where lies the issues on distress? I will like to appeal to members of the banking public to go about and conduct their banking business with any bank of their choice.”

 

Emefiele assured depositors that the CBN will continue to monitor banks.

 

He said: “We are monitoring the banks and where we find that there’s some weaknesses in some, we will target the shareholders. That is because we have often told the shareholders and insiders that they don’t own the banks alone. Our analysis shows that if you look at the balance sheet of an average five-year-old bank, the size of the deposits in those banks is almost 10 times the paid up capital of those banks. So, if you ask me, who owns banks? I will say it is depositors that own the banks and not the shareholders. The shareholders just have what I call the fiduciary responsibility which they must perform but where we find them wanting, we will take them out so that the banks can survive and depositors don’t lose their money.”

 

The CBN Governor also reacted to reports that the CBN will be unveiling its digital currency. He said Nigeria’s digital currency will come into operation by October.

 

Emefiele said: “Digital currency is what central banks all over the world are providing as alternative to the current money arrangement. What are we saying? You have some naira in your account and you chose to convert part of your naira into a digital wallet by way of a digital currency. Of course, when this starts, the CBN will move some of the balances of banks with CBN to digital currency. So, you go to your bank, you have N10 million and you want N2 million out of that into a digital currency, they will debit your account and move it to your wallet which you can spend across countries.

 

“So, we think that this is a noble idea and we are not the first, many other central banks are at advanced stages of revealing their own digital currency.

 

“And our own digital currency which is tagged e-Naira will certainly come into operation by October and we are working very hard for this.

 

“So, what are the objectives? On payment system, we believe that transactions will be cheaper and more efficient. On the digital economy, the Nigerian economy just like the rest of the world is going digital and cash cannot play in that space. Therefore, the e-Naira which will represent the digital equivalent of cash will be used as the fiat currency to effect transactions.”