By Yemisi Izuora-Lagos
The Central Bank of Nigeria (CBN) has directed deposit money banks to ensure that they have sufficient capital buffers to mitigate the escalating risk-taking activities.
The bank stated that where exposure to the oil and gas sector is in excess of 20 percent of total credit facilities of a bank, the risk weight of the entire portfolio in such facilities would attract a risk weight of 125 percent for the purpose of capital adequacy computation.
In addition, the banks were directed to prepare and forward to the central bank their computation and results of their single-factor sensitivity stress test as at December 8, 2014.
It notes that the single-factor sensitivity testing is a form of stress test that usually involves an incremental change in a risk factor, holding other factors constant.
Also the price points to be used by the banks for the test are $50 per barrel, $55 per barrel, $60 per barrel and $65 per barrel.
The price of a barrel of crude oil has almost halved from $115 in June to around $60 last week and most analysts have forecast that oil prices would remain low for most of next year and this may be the challenge banks in the country that have financed oil and gas deals would face.