LAGOS, JULY 29, 2016 – The Central bank of Nigeria has injected more than 100 billion naira ($315 million) into Skye bank after sacking the lender’s top management this month for failing to meet minimum capital requirements, its new managing director said on Friday.
Adetokunbo Abiru also said Skye, Nigeria’s eighth-largest bank, made a pre-tax loss last year, due to oil-related bad loans and withdrawals of public sector deposits amid a government anti-corruption drive, but he did not give a figure for the loss.
That makes Skye the only Nigerian bank to make a loss in 2015, according to Reuters calculations. The central bank stepped in after depositors withdrew assets and to avert wider troubles within the banking sector as Africa’s biggest economy struggles with its worst crises for decades.
The central bank installed a new management team on July 4 with Abiru as managing director. Central bank staff had been working for two weeks inside Skye headquarters in Lagos to support the lender, Abiru told a news conference on Friday.
The bank would conduct an audit to see “what we inherited” and establish how much liquidity was needed, he said.
He hoped to have an overview by December after which Skye could focus on being a “frontline retail” bank. Some branches would be closed to bring down costs, pending approval from the central bank.
Skye’s non-performing loans amounted to 13 percent of total loans at the end of last year, well above the central bank target of less than 5 percent, Abiru said.
The losses “largely arose from issues relating to the cost-income ratio” which was “above the industry standard”, plus “the liquidity challenge as well and asset quality issues, and the resulting effect of all that”, he said.
“There was a very high dependence on public sector debt deposits,” said Abiru, referring to a government order last year to have all official bodies move funds from lenders to a central bank account as part of an anti-graft drive.
“The bank was severely hit by that,” he said, declining to give an outlook for this year.
In addition, half of Skye’s loan book was in foreign currency from the oil industry which has been hit by low crude prices.
The bank’s capital adequacy ratio was 10.4 percent last year, compared with an industry standard of 16 percent, and its cost to income ratio was “close to” 103 percent, rather than the standard of about 65 percent, he said.
Nigeria’s central bank governor Godwin Emefiele is urging people not to panic about the banking system, saying he is on top of any trouble resulting from the economic crisis.
