The mess in the banking industry is far from being over with new discoveries of hidden packets of toxic assets in the troubled banks. More so, experts say the problems may be further compounded following additional news of abuse by some of the interim managers.
According to Bismark Rewane, chief executive officer, Financial Derivatives, in his Monthly Economic News and Views made available last weekend, Merrill Lynch was quoted to have put the total of real toxic assets in the banking industry at N9 trillion, saying that, so far only N1.5 trillion of the toxic assets have been taken. Based on what is on ground, Bismark believes that full recoveries from the banking crisis will definetly be a thing of more than a 12-month journey.
Cyril Chukwumah, interim chief executive, Bank PHB, in an interactive section with financial journalists, had raised an alarm over what his team discovered during an independent audit. According to him, many of the toxic loans were placed in other files, and as such when the Central Bank of Nigeria (CBN)/Nigeria Deposit Insurance Corporation (NDIC) teams audited the bank's financials, very little was discovered compared to what actually represents non-performing loans.
Another source told BusinessDay that what the sacked management did was to hide some of the toxic assets under portfolios like Banks Acceptances (Bas) and Commercial Papers (CPs). Based on the magnitude of the problems, Bismark said: "It is usually a 24 to 36-month painful process with some more lumps of non-performing loans to be swallowed," saying there were short and medium-term challenges and the revelations of the pockets of toxic assets in the rescued banks had been startling. Perhaps, what is more burdensome is the fact that further news about some of the interim managers is throwing more flies into the ointment.
According to the Financial Derivatives chief executive, the current political risk presents a clear and present danger to the CBN autonomy and could derail the entire process. As expected, the inter-bank market remained liquid during the week. Consequently, inter-bank rates dropped at the end of the week. Available data showed that the 7-day Nigerian Inter-Bank Offer Rate (NIBOR) closed the week at 2.63 percent, a 142 basis point decrease from the previous week's figure of 4.04 percent.
While the 90-day NIBOR closed the week at 8.29 percent, a 446 basis point decrease from the previous week's figure of 12.75 percent. There was no auction at the primary and secondary segments of the government securities market. At the foreign exchange auction held on Monday, March 1, 2010, the CBN offered $250 million, sold a total of $176.63 million, while it offered and sold $250 million in the previous week.
On Wednesday, March 3, the CBN offered and sold a total of $200 million, compared to $250 million offered and sold in the previous week. In all this week, the CBN offered and sold a total of $450 million compared to $500 million offered in the previous week.
The value of the naira appreciated in parallel and official segments of the foreign exchange market, but depreciated at the inter-bank market. At the parallel, official markets, the value of the naira appreciated by 30 kobo to close at N151.70/$1 and N148.61/$1 compared to the previous week's figures of N152/$1 and N148.61/$1, respectively.
At the inter-bank market, the naira depreciated by 11 kobo to close the week at N150.61/$1 compared to the previous week's figure of N150.50/$1.
(Source:BusinessDay)
