Nigeria had 24 distressed banks in 2002 – CBN Report

From Bright Ewulu,  in Lagos

The Central Bank of Nigeria (CBN) has disclosed that as at December 31, 2002 there were 24 banks in the nation’s financial system which had very serious liquidity problems, and were mostly distressed.

According to the CBN’s 2002 banking supervision annual report, the 24 illiquid banks were made up of seven insolvent banks and 17 others which were either undercapitalised, suffering from liquidity problems or having notable poor asset quality.

It said that of the banks, 14 had liquidity problems, stressing that seven were significantly illiquid, four were critically illiquid and three, fairly illiquid.

The CBN revealed further that these banks were in the period under review in control of 9.2 per cent of the banking system’s total assets, and 10.4 per cent of its overall deposit liabilities, adding that 11 banks, representing 123 per cent of the 90 banks in the system obtained "life boat" facilities from the Nigeria Deposit Insurance Corporation (NDIC) in that same year.

On the 24 problematic banks in the entire banking industry, the CBN said that the seven critically distressed banks had N56.71 billion or 2.3 per cent of the banking system’s total assets of N2,476.4 billion as at December 2002.

"These include three formerly distressed banks that were recapitalised and granted two-year forbearance to return to normalcy. The 24 problem banks, together controlled N310.17 billion or 12.5 percent of the banking system’s total assets as at the review date," it added.

It would be recalled that CBN’s contingency plans for illiquid banks directed that such banks must account for 20 percent of the total assets in the industry Crisis Management Unit (CMU).

Also, the 24 problem banks in the deposit side held N131.57 billion or 12.2 per cent of the system’s overall deposits of N1.1 trillion, which was below the threshold of 15 percent or more of the system’s total deposit stated in the contingency plan.

The report said further that in the non-performing credits criteria, the system was safe as the total non-performing loans figure in the period of N187.3 or 20.3 per cent was far from the 35 per cent stated clearly in the contingency plan.

CBN noted, however, that it was cause for concern over the liquidity criteria as 11 banks, representing 12 per cent of the total number of banks in the system obtained "life boat" facility from CBN/NDIC within the period which was higher than the 10 percent stated in the contingency plan.