charles c soludo : the safety and soundness of the nigerian banking system press statement by professor charles c soludo, governor of the central bank of nigeria, on the safety and soundness of the banking system, abuja, 12 june 2007. * * * this briefing is to clarify some pertinent issues regarding the state of springbank, and to reassure the nigerian public that the banking system is the safest and soundest it has ever been in its history, and that the cbn and ndic will take all necessary measures to protect all depositors of the banking system. i : banking sector consolidation : progress so far as you are all aware, the banking sector consolidation programme was necessitated by the pervasive weaknesses and uncertainty of the banking system, and the need to re - engineer and fast - track a system that will engender confidence and power a new economy. so far, the grand objectives of that policy are being achieved, and our consolidation programme has been adjudged about the most successful in the world. the world is celebrating nigeria ’ s success, and over $ 1 billion of foreign investment has gone into the sector within the last 12 months, and several hundred millions of dollars are still pouring in. the non - performing loans as percentage of total loans have gone down from about 23 % before consolidation to less than 8 % currently ; total deposits have almost doubled, and credit to the private sector growing astronomically ( annualized at 72 % within the first four months in 2007 ). today, individual banks can finance big projects valued at hundreds of millions of dollars and also operate in the oil and gas sector – a feat they never could do before now. interest rates are gradually coming down. as at today, there are over 3, 866 branches of commercial banks, up from 3, 200 prior to consolidation and the total employment in the sector far higher than prior to consolidation. by end 2007, there will be about 7 or more banks with shareholders fund in excess of $ 1 billion, and over 10 banks with market capitalization of over $ 2 billion each ( there was none in 2004 ). today, nigeria has the fastest growing banking system in africa, and one of the fastest in the world. as seasoned commentators have observed, it has taken nigeria less than three years to achieve what it took south africa 20 years to achieve in the area of banking. to put it succinctly, a new banking system has emerged, and will only get stronger

will adopt inflation target as the nominal anchor for monetary policy with effect from january 1, 2009. low and stable inflation will be our monetary policy ’ s primary long - term goal. focusing on inflation targeting does not mean that the cbn will not be interested in other broader objectives of macroeconomic policy – output growth, employment, exchange rate, and balance of payments. rather, an inflation - targeting framework will enable cbn to pursue these objectives in a more disciplined and consistent manner rather than the ad - hoc processes of the past. locking - in inflationary expectations is one effective way of ensuring that the currency re - denomination will be sustainable. the outcome of this new framework will greatly improve the credibility of the cbn as the monetary authority, as well as deepen the financial markets and promote rapid development of a private sector - led economy. we will use the next 16 months to fully prepare for the introduction of this framework especially in the light of the deep technical issues involved. the cbn would collaborate with the national bureau of statistics in significantly improving the availability of high frequency and reliable data especially those of the gdp and more robust measures of the price indices. c : sharing part of the federation account allocation in us dollars to deepen the forex market and for liquidity management : to commence from september given the structure and development of the financial system, the underdeveloped nature of the forex markets, as well as the restrictions on foreign exchange transactions, the cbn has traditionally fully monetized the foreign currency receipts in the federation accounts, to be shared by the three tiers of government. initially, the cbn also maintained the accounts for all the tiers of government – as part of the liquidity management framework. subsequently, as the banking system developed, the cbn allowed the share of the states and lgs to be deposited with the commercial banks. recently, following the reforms in the banking sector and the further liberalization of the forex market, both the financial system and the forex market have deepened and become increasingly sophisticated. since 2006, the cbn adopted the wholesale dutch auction system ( wdas ) in the forex market and significantly liberalized the forex market. furthermore, nigeria has exited the debt trap, built up significant external reserves, and the autonomous inflows into the forex market are such that the cbn has become a marginal player in the forex market. the forex market has become so efficient that nigeria no longer has multiple currency practices ( as defined by the imf ).