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CBN Stress Test Shows Banks Safe, Resilient as NPLs fall to 4.2%

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The Banking System Stability Review Report of the Central Bank of Nigeria (CBN) has shown that Nigerian the banking system remains safe, sound, and resilient.

All the various Financial Soundness Indicators (FSI) were within the prudential requirements and compared well with comparator countries.

Non-Performing Loan (NPLs) ratio fell from 4.9% in September 2022 to 4.2% in December 2022, the report showed.

Capital Adequacy Ratio remained unchanged for the banking sector at 13.8%, while return on equity (ROE) rose to 20.2% in December 2022 from 18.4% in September 2022.

Total operating cost to total operating income declined from 74.6% in September 2022 to 74.1% in December 2022.

Meanwhile. all measures of industry aggregates: assets, deposits and credit rose year on year. Total assets of the banking industry grew by ₦14.36 trillion or 24.24 per cent to ₦73.59 trillion in December 2022, from ₦59.24 trillion in December 2021, driven by balances with CBN/banks, investments, and credit expansion to the real sector..

Similarly, industry credit increased by N5.14 trillion over the same period. In addition, total industry deposits rose by N7.08 trillion between year End-December 2021 and 2022.

In December 2022, a total of 130,854 new credits valued at N947.46 billion were granted to various customers.

“I believe that the risks to financial stability of further tightening are generally muted. The banking system continues to be resilient with major financial soundness indicators (FSIs) comparing favourably with prudential thresholds. The industry is well capitalized and liquid. Asset quality continues to improve with nonperforming loans ratio at 4.2 per cent in December 2022, when viewed against the prudential benchmark of 5.0 per cent,” Adamu, Edward Lametek, a Deputy Governor of the Central Bank of Nigeria, said.

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