Are Nigerian Banks Immune To The Jitters From SVB, Signature Bank Collapse ? CBN Gov. Emefiele Says, ‘We’re Good’
The Oasis Reporters
March 24, 2023
A year ahead of the Nigerian General elections which were concluded in March 2023, no one could really know or say why the Governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele said,
“in line with Sections 19, Subsections a and b of the CBN Act 2007, the Management of the CBN sought and
obtained the approval of President Muhammadu Buhari to redesign, produce, and circulate new series of banknotes at N100, N200, N500, and N1,000 levels.
I urge Nigerians to embrace the new N200, N500, and N1,000 banknotes, which will circulate alongside the old banknotes till January 31, 2023.
— Godwin I. Emefiele (@GodwinIEmefiele) November 23, 2022
“In line with this approval, we have finalized arrangements for the new currency to begin circulation from December 15, 2022″.
Old Currency Notes were deftly hauled into bank vaults, enroute to the Central Bank. Not too much of the new bank notes came out. Godwin Emefiele was preaching the message of going digital with financial transactions.
Almost everyone focused attention on the difficulties money bags politicians would go through in buying elections.
But it seems the CBN governor had other things in his sight.
With the collapse of Silicon Valley Bank and Signature Bank in the United States and the shake that snowballed into a “shotgun wedding”, Credit Suisse bending down to be taken for better for worse by UBS in Switzerland, long lines of scared customers were seen in front of the affected banks intent on withdrawing their cash, thus precipitating a bank run.
In Nigeria, cash was difficult to come out. Technology was not helping Nigerians to linger too long on cashless transfers, thus making withdrawals a slow and steady dance show.
With little money in circulation, one may be angry, but the dog of inflation was howling, without seriously biting.
Luckily, the unique Nigerian “roforofo fight” helped to keep bank runs at bay, should it try to travel from California to Lagos.
Well, It didn’t.
Hence Governor Emefiele assured the public that Nigerian banks are not directly exposed to the Silicon Valley Bank crisis and by implication, the wider global banking jitters. The lack of trust, loss of confidence and systemic risk contagion didn’t get to Nigeria, just like it didn’t get to Australia and New Zealand.
Steven Senne/AP
The CBN Governor made the statement about the health of Nigerian Banks when responding to questions after the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, according to a report by Adedapo Adesanya of Business Post Nigeria.
Mr Emefiele stated that Nigerian banks are healthy, having met all the prudential guidelines it set for the financial system.
According to the CBN chief, Nigerian banks have already implemented the CBN prudential guidelines, such as its cash reserve ratios, capital adequacy ratios, non-performing loans (NPL), and liquidity ratios.
There have been concerns about the health of the global financial system in the aftermath of the March 10 collapse of Silicon Valley Bank.
According to the CBN Governor, the apex bank conducted a review of all the bond portfolios of Nigerian banks and determined that none of them was exposed to the failed bank.
He suggested that Nigerian banks are ultimately owned by bank depositors and not shareholders.
“We will rather dispose of shareholders than make depositors lose money,” suggesting that bank customers had little to fear, no loss in banks than their shareholders.
He however, did not speak to exposure to other banks currently caught in the line of fire, such as Credit Suisse.
US regulators had stepped into the trouble following the troubles in SVB and Signature Bank by guaranteeing deposits earlier this month.
However, the collapse of Credit Suisse over the weekend reignited fears of contagion across the financial sector.
Unlike SVB, a mid-tier bank, Credit Suisse is a top financial organisation – big enough that it is among 30 banks considered to be of systemic importance to the global economy.
UBS agreed to buy its embattled rival Credit Suisse for $3.2 billion on Sunday, with Swiss regulators playing a key part in the deal as governments looked to stem a contagion threatening the global banking system.
The terms of the deal will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares they hold
By Greg Abolo.
Additional reporting:
The Conversation
Business Post Nigeria
Already jittery customers queue outside a Silicon Valley Bank branch Wellesley, Massachusetts, March 13, 2023.
Steven Senne/AP
