By Gbenga Adedayo
There are growing fears that most Nigerian banks may not be as financially strong as they want the public to believe as most of them are already manifesting symptoms of capital inadequacy.
This is coming on the heels of the recent alarm by the International Monetary Fund (IMF) that Nigerian banks lack the capacity to boost the growth of the Nigerian economy, advising the banks to raise fresh funds to boost their capacity adequacy ratios.
IMF which spoke recently through its Mission Chief for Nigeria, African Department, Amine Mati, said that commercial banks need to recapitalize and secure fresh funds to support Federal Government’s Economic Recovery and Growth Plan (ERGP) programme.
The IMF said this is the only way the banks can drive the desired growth in the economy and support the government’s efforts at push-starting the economy.
Capital Adequacy Ratio (CAR) is basically the proportion of the bank’s tier 1& tier 2 equity (Qualifying capital or Equity) as a proportion of its risk weighted assets (loans). It is the proportion of a banks own equity in relation to its risk exposure.