Aakillar benThe financial crisis of 2007 to the present is a crisis triggered by a liquidity shortfall in global banking system caused by the overvaluation of assets. It has resulted in the collapse of large financial institutions, the bailout of banks by national governments and downturns in stock markets around the world. In many areas, the housing market has also suffered, resulting in numerous evictions,foreclosures and prolonged vacancies. It is considered by many economists to be the worst financial crisis since the Great Depression of the 1930s. It contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by governments, and a significant decline in economic activity. Many causes have been suggested, with varying weight assigned by experts. Both market-based and regulatory solutions have been implemented or are under consideration, while significant risks remain for the world economy over the 2010?2011 periods. 0017 July 2010
Aakillar benEffects of the economic crises on Nigeria financial Institutions ----
- Large Nigeria banks lost more than N200 billion on toxic assets and from bad loans from January 2007 to September 2009. These losses are expected to top N500 billion from 2007-10.
- Some of the first victims were Intercontinental Bank Plc, Union Bank Plc, Bank PHB, AfriBank Plc and Oceanic Bank Plc. The highly leveraged nature of their business led the Central bank injest funds in tune of billions of Naira in attempt to save them.
- This also led to investor panic and a bank run in 2009, several Financial experts warned that doom is near but the then CBN Governor Soludo assured the masses that the banks are very strong. However, when it got out of hand the effect was crippling, the Nigerian Stock exchange was the first hit, billions of Naira was lost in few weeks. Other Financial Institutions like, Mortgage houses, Brokerage firms, Micro finance banks collapsed.
- Foreign investors began dumping their shares and investment in Nigerian economy, this aggravated the effect on the stock market and the financial institution resulting in shortage of cash flow and working capital.
- The stock price of all the 25 banks nosedived and became penny stocks with some going for as low as N3 per share and even less.
- The CBN Governor Sanusi Lamido had to order an audit on all the 25 banks in Nigeria. The audit revealed many shocking problems with the bank ranging from bad debts and loans, overvaluation to fraudulent business activities.
- Leading rates skyrocketed as banks seek to clean up their mess and return to profitability, this had a serious effected on the manufacturing sector which culminated in increase price for goods and services. 0017 July 2010