• Seven Nigerian banks out of 24 banks are not adequately funded in 2018, according to CBN's latest financial stability report.
  • The stress test is part of CBN's efforts to significantly minimise the impact of risks on the Nigerian financial system.
  • Baseline capital adequacy ratio (CAR) for the banking industry at end-December 2018 was 15.26%, indicating a 3.18% points increase from the 12.08% recorded at end-June 2018.

Nigeria's central bank (CBN) has said seven commercial banks in the country failed stress test in adequate funding at the end of 2018.

In a financial stability report published on its website on Thursday, October 17th, the apex bank revealed that in less than 30-day period analysis, seven Nigerian banks were not adequately funded, while in the 31-90 day bucket, nine banks had funding gaps.

Overall the cumulative position for the industry showed an excess of N4.8 trillion assets over liabilities, CBN said in a report seen by Business Insider SSA.

The banking regulator did not mention the names of the seven of the banks.

seven Nigerian banks failed stress test
seven Nigerian banks failed stress test

Stress test conducted by CBN explained

Here, a stress test is used to test the resilience of financial institutions against any future situations. It is done to help check the level of a bank's assets, as well as evaluate internal processes and controls.

Other highlights of the report:

  • Baseline capital adequacy ratio (CAR) for the banking industry at end-December 2018 was 15.26%, indicating a 3.18% points increase from the 12.08% recorded at end-June 2018.
  • The baseline banking industry NPL ratio was 11.64% at end-December 2018, showing a slight improvement of 0.81% points from 12.45% recorded at end-June 2018.
  • The stress test result revealed that after a one-day run scenario, the liquidity ratio for the industry declined to 34.69% from the 51.87% pre-shock position and to 17.55 and 13.48% after a 5-day and cumulative 30-day scenarios, respectively.
  • The result also revealed that under 5-day and cumulative 30-day run scenarios on the banking industry, liquidity shortfalls declined to N1.58 trillion and N1.98 trillion respectively.