Nume Ekeghe

A report by the Central Bank of Nigeria (CBN), has revealed that the nation’s banking sector maintained its resilience in the fourth quarter of 2024, as key financial soundness indicators showed significant improvements.

The CBN’s Q4 2024 Economic Report revealed that the banking system’s capital adequacy ratio (CAR) rose by 2.68 percentage points to 15.20 per cent, up from 12.52 per cent in the previous quarter.

This improvement, according to the CBN, was due to an increase in total qualifying capital and a reduction in risk-weighted assets. The ratio, it added, remained above the regulatory thresholds of 10.00 per cent for banks with national and regional licenses and 15.00 per cent for those with international authorisations, reinforcing the sector’s financial stability.

The CBN also highlighted improvements in banks’ asset quality, as the ratio of non-performing loans (NPLs) declined by 0.08 per cent points to 4.50 per cent in December 2024 from 4.58 per cent in September 2024. This level remains below the prudential benchmark of 5.00 per cent, indicating a healthier loan portfolio and better loan recoveries across the industry.

On the financial soundness indicators, it stated, “The banking sector remained resilient and stable during the review period, evidenced by the robust performance of key financial soundness indicators. The banking system capital adequacy ratio (CAR) improved by 2.68 pp to 15.20 per cent, relative to the 12.52 per cent in the preceding period.

“The development reflected the improvement of banks’ total qualifying capital and the decrease of risk-weighted assets. The ratio remained above the 10.00 and 15.00 per cent benchmarks for banks with national/regional and international authorisations, respectively. Banks’ asset quality improved as the ratio of non-performing loans (NPL) declined by 0.08 pp to 4.50 per cent from 4.58 per cent in September 2024. The ratio was below the prudential benchmark of 5.00 per cent, implying an improvement in loan recoveries due to compliance with the extant regulations.

“Furthermore, it states that the industry liquidity ratio (LR) grew by 5.47 pp to 49.06 per cent, relative to 43.59 per cent in the preceding quarter. The LR remained above the minimum regulatory benchmark of 30.00 per cent, illustrating the liquidity sufficiency of the banking system and the ability of banks to meet emerging obligations.”

The report added, “The financial sector remained resilient amid monetary expansion and fluctuating liquidity conditions. Broad money supply (M3) grew by 42.76 per cent to N113.14 trillion, driven by a rise in net foreign assets (NFA) and net domestic assets (NDA). However, liquidity conditions in the banking system led to a slight uptick in short-term interest rates. Robustness analysis indicated that the banking industry remained strong, as financial soundness indicators were within thresholds, reinforcing confidence in the sector. This stability and favourable market conditions bolstered investor sentiment and fuelled a strong performance across various capital market segments during the review period.”