(Adds details, quotes)
LAGOS Oct 12 Nigeria's banks are facing
economic challenges but have strong capital buffers to weather
the crisis, a central bank official said on Wednesday following
a meeting with lenders.
Nigeria, Africa's biggest economy, is in recession with a
slump in the oil revenues that make up the bulk of its foreign
earnings having hammered public finances and the naira currency.
In June the central bank dropped its peg of the naira
against the dollar, prompting the local currency to depreciate
by 40 percent, further hitting consumers' spending power.
The non-performing loan (NPL) rate in the banking sector hit
11.7 percent in the first half of 2016, well above the central
bank's 5 percent limit, and it has forecast a further rise in
the second half.
NPL's stood at 5.3 percent at the end of last year.
Loans to the oil and gas sectors accounted for almost a
third of total bank lending, the central bank said in its
half-year financial stability report.
The fall in oil prices since mid-2014 has forced Nigerian
lenders, which have long focused on loans to the energy sector,
to adapt their business models.
"Banks have strong capital buffers," Tokunbo Martins, the
central bank's director of banking supervision, told journalists
after the meeting, which is held every two months.
In July, the central bank sacked the management of Skye
bank, Nigeria's eighth biggest, for failing to meet minimum
"Banks are feeling the headwinds," added Martins, who said
the supply of foreign exchange for manufacturers would be
improved. However, she did not say how.
(Reporting by Ulf Laessing and Oludare Mayowa; Writing by
Alexis Akwagyiram; Editing by Toby Chopra and John Stonestreet)