Major Nigerian banks are in a state of panic, 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.
It was learnt that Cardoso 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.
Recall that Fitch Ratings, in a February 15, 2024 rating action on 12 Nigerian Banks, said 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.
Fitch put FCMB and Union Bank of Nigeria (UBN) on rate watch negative (RWN) while downgrading Ecobank Nigeria entirely.
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.
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%.
