Nigeria’s banking industry is experiencing a “full-blown financial crisis” as failed fiscal and monetary policies lead to a credit crunch, according to Arqaam Capital.

Unity Bank Plc and Skye Bank Plc are close to being insolvent, while lenders FBN Holdings Plc and Sterling Bank Plc “will need a dilutive capital hike,” Jaap Meijer and Tarek Sleiman, analysts at the Dubai-based investment bank and brokerage, said in an e-mailed note on Monday. Capital ratios are set to worsen because of currency depreciation and souring loans, they said. Calls to Unity weren’t immediately returned and Skye didn’t reply to questions.

The central bank in July replaced the management of Skye after the lender breached liquidity thresholds, spurring concerns about the health of small- and medium-sized lenders, and reviving memories of bank rescues by the government after the financial crisis in 2009. Nigerian banks are grappling with a devaluation of the naira, rising bad loans and an oil-dependent economy that’s set to record its first annual contraction in more than two decades.

“Our acid test reveals seven under-capitalized banks” with a deficit of as much as 1 trillion naira ($3.2 billion) in the financial system, Meijer and Sleiman said. A stress test identified FBN as the most under capitalized lender with Unity, Diamond Bank Plc, Skye, FCMB Group Plc, Sterling and Fidelity Bank Plc also showing deficits if they were to fully provide for non-performing loans, according to Arqaam.

“Our bank is strong,” Ikechukwu Mike Omeife, a spokesman for Diamond Bank, said by phone from Lagos. “Our capital-adequacy ratio and non-performing loans are within the statutory requirements.”

Moody’s Investors Service said on Monday that Nigeria’s five biggest banks share common credit challenges related to the economic slowdown. Moody’s expects non-performing loans to increase to about 12 percent over the next 12 months. The ratio of non-performing loans to total credit rose to 11.7 percent at the end of June from 5.3 percent at the end of 2015, the Abuja-based Central Bank of Nigeria, which requires banks keep the measure below 5 percent, said in a report on its website.

The five largest lenders, which together hold 57 percent of the country’s banking assets, “are able to absorb all losses under our severe stress scenario,” Moody’s said. Guaranty Trust Bank Plc showed “the greatest resilience” and the other four banks were Zenith Bank Plc, Access Bank Plc, United Bank for Africa Plc and First Bank of Nigeria Ltd., the ratings company said.

To create a capital buffer, Sterling Bank is planning to issue a 27 billion-naira bond and “if the interest rate looks better, we will do it this year,” Abubakar Suleiman, the lender’s chief financial officer, said by phone. “We will do it if the rate goes down to around 15 percent or 16 percent. We don’t want to raise it at a very high rate. If we do it, it will take our capital adequacy ratio to over 15 percent.”

Arqaam rates FBN, Skye, Sterling, Stanbic IBTC Holdings Plc, Unity and Ecobank Transnational Inc. as sell, according to the analysts’ report. Zenith, Access and United Bank are rated buy.

Central Bank of Nigeria’s spokesman Isaac Okorafor didn’t immediately answer his phone or respond to text messages. Diamond, Unity and Fidelity didn’t answer calls. Moses Obajemu, a Lagos-based spokesman for Skye, didn’t immediately reply to questions sent to him by text message, as per his request.

Diamond, Fidelity, Wema Bank Plc, FCMB Group Plc, United Bank and Skye recorded declines in Lagos, with Zenith ranking as the most traded stock among the 171 securities on the Nigerian Stock Exchange All Share Index. Diamond Bank fell 5.5 percent, Fidelity dropped 4.3 percent, Skye Bank slid 4.6 percent and Unity slipped 4.1 percent. Union Bank Nigeria Plc, which is part owned by London-based Atlas Mara Ltd., was the second-biggest gainer, rising 5 percent.