Silicon Valley: No Nigerian bank has direct exposure

There is no direct investment by Nigerian banks in the Silicon Valley Bank (SBV) which may lead to loss of investment, the Central Bank of Nigeria has said.

The top bank spoke amid uncertainty over the takeover of Silicon Valley Bank by the US government after clients, including venture capitalists and tech startups, withdrew funds from their accounts, leading to the bank’s collapse.

The collapse has raised concerns about the potential impact on other banks in the world.

CBN Governor, Godwin Emefiele, while responding to questions at the end of the monetary policy committee meeting held in Abuja on Tuesday allayed the fears of many concerned Nigerians.

According to him, Nigerian banks are healthy and remain insulated from such risks after meeting all the ‘prudential guidelines’ set for the financial system.

Guidelines

According to him, Nigeria is one of the few countries in the world with a cash reserve deposit requirement.

“This was before I started banking that if you deposit money in a bank, a certain percentage of that deposit is placed by the Central Bank of Nigeria to ensure that if there is any type of liquidity crisis, the money is available to the bank so that it can be used to solve the liquidity problem so that the depositors do not lose money.

“We also have a liquidity ratio… (a) liquid assets defined against the total bank deposits held in cash in bank accounts… or treasury bills, OMO bills and other liquid instruments and in Nigeria our ratio is a minimum of 30 percent, banks .stay on top,” he said.

The CBN governor noted that the liquidity ratio is about 43 percent, cash reserves are about 32.5 percent, while the loan deposit ratio is about 52.47 percent,

He also explained that despite maintaining these guidelines, the banks remain profitable.

According to him, the ROI remains relatively strong even when the banks convert this into dollars, it appears weaker but at the same time, the banks continue to generate profits and pay good dividends to their shareholders.

“Nigeria, again, is one of the countries in the world where even though banks have declared their profits and paid taxes, a certain percentage of their profits must be set aside to build income and capital is retained.

“If you are a small bank, it will be 25 percent. A quarter of whatever profit you make is set aside and built into a statutory reserve fund that will increase the bank’s capital. If you are a large bank, then it will be reduced to 15 percent,” he said.