Silicon Valley: No Nigerian bank has direct exposure – CBN

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

The apex bank spoke out amid uncertainty over the US government's takeover of Silicon Valley Bank 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 around the world.

CBN Governor Godwin Emefiele while answering questions at the end of the Monetary Policy Committee meeting held in Abuja on Tuesday allayed the fear of many worried Nigerians.

According to him, Nigerian banks are in good health and remain insulated against such risks after adhering to all the “prudential guidelines” they have set for the financial system.

Guidelines

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

"This existed before I even started banking, 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 in the event of a crisis of liquidity, that money is available to that bank for them to use to solve that liquidity problem so that depositors don't lose their money.

“We also have a liquidity ratio…(a) a specified liquid asset relative to the banks total deposit either held in cash in the bank’s safe deposit box…or treasury bills, OMO bills and different other liquid instruments and in Nigeria our ratio is at least 30 percent, banks stay above that,” he said.

The CBN Governor noted that the liquidity ratio is about 43%, the cash reserve about 32.5%, while the loan deposit ratio is about 52.47% ,

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

According to him, the return on investment has remained relatively strong even though when the banks convert them into dollars, they seem weaker but at the same time the banks have continued to make profits and pay good dividends to their shareholders .

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

"If you are a small bank, it will be 25%. A quarter of any profit you make is set aside and put into what we call the statutory reserve fund to improve the capital of that bank. If you you're a big bank, then it comes down to 15%," he said.

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