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Facing the Global Financial Crisis:
What Risks does Nigeria’s Financial Sector Face?
With the re-capitalization and improved risk management practices, Nigeria's financial markets are as sound and robust as ever
In 2008, Nigeria’s financial sector has two problems to deal with. On the one side, the banking sector reforms have encouraged a boom in Nigeria’s capital markets, which in turn has exposed the banks to risk from the global economic slowdown. On the other, the price of oil, on which Nigeria’s economy depends, has more than halved since its high of USD147 in July. There’s no doubt that this is the bigger problem for the country. Without the oil revenue income, and with reduced foreign investment, the banking sector will struggle to continue to consolidate and recapitalise. The worst-case scenario could see a loss of confidence in the sector and a return to the overcrowded, undercapitalised conditions that typified the sector, pre-2007.
But how likely is this to happen? Professor Chukwuma C. Soludo, the architect of the banking sector reforms and head of the Central Bank of Nigera (CBN), has spoken out to reassure the market that the sector is well covered.
“If we did not do what we did four years ago, our banking system would have been wiped away with the current global financial crisis. What the rest of the world is doing now is what we did over four years ago and that has made our banking sector remain strong and robust,” said Professor Soludo.
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