Nigerian Banks Should Be Ready to Face a Very Tough Year – CBN

TheCentral Bank of Nigeria, CBN, in its Financial Stability Report for December 2014, said financial institutions should be ready for a very tough year.
The apex bank said oil and gas firms owe financial institutions about N3.24 trillion, adding that low crude oil prices will pose a significant risk to Nigeria’s financial system and might lead to an increase in Non-Performing Loans (NPL). 
According to the CBN, sustained low oil prices may, however, result in an increase in NPLs, given that the exposure to the oil and gas sector accounted for 25.70 per cent or N3.24 trillion of the total credits of N12.63 trillion at end-December 2014. 
“Anticipated sources of risk in the financial system in the first half of 2015 would include declining crude oil prices, due to United States’ shale oil and gas production and the resultant pressure on the naira exchange rate.
“Others include a reversal of capital flows, owing to improvements in the US economy and the adverse implications for the capital market; a possible increase in non-performing loans; security challenges in parts of the country. There are equity market losses that might linger as a result of low investor confidence; uncertainties associated with the 2015 general elections; and an upward inflationary pressure from election spending and an expected increase in electricity tariffs in the first half of 2015.”

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