Nigeria Says Its Banks Are Safe, Urges Against Panic Withdrawals

(Bloomberg) -- Nigeria's central bank said all its lenders are safe, aiming to quell fears after it ousted the management of Skye Bank Plc on Monday for failing to meet capital and liquidity thresholds.

“The Central Bank of Nigeria hereby reassures the banking and general public that their deposits remain safe,” Isaac Okorafor, a spokesman for the Abuja-based regulator, said in an e-mailed statement Wednesday. “There is, therefore, no need for panic withdrawals from any bank.”

Plunging oil prices since mid-2014 have hammered Nigeria, traditionally Africa's biggest crude producer, and sent the economy to the brink of recession. Banks, which give about 30 percent of their loans to oil and gas businesses, are struggling as their avenues to make money are choked off by the slowdown and rising bad debts. The Nigerian banking index is down 19 percent in the past year.

The shares of Skye, Nigeria's eighth-biggest lender by assets, fell 9.5 percent on Monday shortly before the central bank and the company issued separate statement's announcing that the chief executive officer, chairman and 10 other directors resigned and were replaced by a new management team, led by CEO Timothy Oguntayo.

Skye's market value has dropped 86 percent in the past five years to 13.1 billion naira ($47 million). It's shares have lost 40 percent this year, making it the worst performer among the nation's banks. The Nigerian stock market will re-open on Friday after being closed for a three-day public holiday.

Proactive Step

“The infusion of a new board and management for Skye Bank is a proactive regulatory action meant to ensure that the bank does not continue to fail in its relevant prudential ratios,” the central bank's Okorafor said. “Neither Skye Bank nor any other bank in the industry is in distress.”

The steps became unavoidable after Skye Bank's liquidity and non-performing loan ratios both breached required thresholds, the central bank said on Monday. The bank's failure to meet minimum adequacy ratios resulted in the “bank's permanent presence” at the regulator's lending window designed to provide cash for lenders struggling to borrow from other sources, it said.

Skye's new executives will “work to increase investors' returns on their investment,” Moses Obajemu, a spokesman for the Lagos-based lender, said in a separate e-mailed statement on Wednesday. The bank aims to be “not just a front-line retail and commercial bank, but an industry leader.”

--With assistance from Emele Onu To contact the reporter on this story: Paul Wallace in Lagos at pwallace25@bloomberg.net. To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Vernon Wessels