Silicon Valley: No Nigerian bank has direct exposure – CBN

There is no direct investment by Nigerian banks in Silicon Valley Bank (SBV) that could result in a loss of investment, the Central Bank of Nigeria has said.

The apex bank spoke amid uncertainty over the takeover of the Silicon Valley Bank by the U.S. government after its clients, including venture capitalists and tech startups, withdrew funds from their accounts, leading to the eventual crash of the bank.

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

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

According to him, Nigerian banks are healthy and remain insulated against such risks having met all the ‘prudential guidelines’ it set for the financial system.

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

“This has been there even before I started banking that when you deposit your money in a bank, a certain percentage of that deposit is serialized by the Central Bank of Nigeria to ensure that when there is a kind of liquidity crisis, that money is available to that bank for them to use to solve that liquidity problem so that depositors do not lose their money.

“We also have liquidity ratio… (a) specified liquid asset against total deposit of banks either held in cash in bank vault… or treasury bills, OMO bills, and different other liquid instruments and in Nigeria, our ratio is minimum of 30 percent, banks keep above that,” he said.

The CBN governor noted that the liquidity ratio is about 43 percent, the cash reserve 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 has remained relatively strong even though when banks convert these to dollars, they seem weaker but at the same time, the banks have continued to make a profit and pay good dividends to their shareholders.

“Nigeria again is one of those countries in the world where even after a bank has declared profit and paid taxes, a certain percentage of its profit must be set aside to build retained earnings and capital.

“If you are a small bank, it’s going to be 25 percent. One-quarter of whatever profit you make is set aside and built into what we call the statutory reserve fund to improve the capital of that bank. If you are a big bank, it then reduces to 15 percent,” he said.