March 31, 2009

The Central Bank of Nigeria won’t allow any of the West African nation’s banks to fail because of the effect it would have on the continent’s second-biggest economy, Governor Chukwuma Soludo said.The central bank plans to carry out a “rigorous” examination of the nation’s banks to detect “early warning signals” about possible failures, Soludo said in a presentation today in the commercial capital, Lagos. Banks in distress may be provided with loans, have their management restructured, be forced to merge or be acquired by another bank, he said.

“No bank will fail,” Soludo said. The “contagion effect of any bank failure at this time will be catastrophic for the economy.”The banking industry in Nigeria, Africa’s biggest oil producer, is facing a liquidity crisis as the global credit crunch curbs lending by foreign banks and as economic growth slows following a 65 percent drop in oil prices since July. The domestic stock exchange, of which banks make up about two-thirds of market capitalization, has dropped 37 percent this year.“With the drying up of global finance and the non-bank investing public still nascent.