Banking sector bad loans hit N2.42trn- NDIC



The Nigeria Deposit Insurance Corporation (NDIC) has disclosed that total Non-Performing Loans (NPL) in the banking sector hits N2.42 trillion or 15.18 per cent as at September 30, 2017, the highest in over 10 months

According to NDIC, the banking sector in 2016 reported a Non-Performing Loan of about N1.6 trillion or 10.13 per cent to highlight impact of recession on banks’ lending to key sector of the nation’s economy.

Finance analysts had also attributed the rise in Non-Performing Loans to the fall in global oil prices and production levels arising from the militancy in the Niger-Delta region of the country.

NDIC in a report obtained by InsideBusiness stated that banking sector Non-Performing Loan crossed the N2 trillion threshold in April this year to N2.09 trillion and moved to N2.1 trillion in May.

The report by NDIC stated that Non-Performing Loans dropped to N1.88trillion in June and increased significantly to N2.3 trillion and N2.4 trillion in July and August respectively.

The report stated that total loans & advances continued to drop this year despite steady recovery in nation’s economy.

According to NDIC, total loans & advances to customers as at December 2016 was at N16.18 trillion to dropped to N15.98 trillion as at September 30, 2017.

Meanwhile, five commercial banks have infringed the Central Bank of Nigeria (CBN) five per cent Non-Performing Loan (NPL) ratio threshold, as a few leading commercial banks operated below it.

Based on the nine months ended September 30, 2017, unaudited result and accounts, the five commercial banks had an average 10.4 per cent NPLs ratio.

 The CBN had advised banks to retain more earnings to mitigate the risk of NPL which the apex has observed are now rising in the banking system.

FBN Holdings has one of the highest NPL in the banking sector, 20.1 per cent from 24.4 per cent in 2016, followed by Union Bank of Nigeria with 9.14 per cent NPL ratio from 6.91 per cent reported in 2016.

A foreign subsidiaries bank, Stanbic IBTC Holdings has 7.2 per cent NPL in nine months of 2017 from five per cent reported in 2016 while Diamond Bank’s NPL remained flat at 9.5 per cent.

In addition, leading commercial bank in Small and Medium Enterprises (SMEs) reported, Fidelity Bank NPL’s hits 5.6 per cent in nine months ended September 30, 2017 from 6.6 per cent in full year ended December 31, 2016.

The CBN’s governor, Mr. Godwin Emefiele, said the banks NPLs deteriorated in line with the difficulties of the macro economy.

According to him, “Weakening resilience of the Nigerian banking sector (though the industry remained largely robust) as: NPLs deteriorated in line with the difficulties of the macro economy; and Banking system exposure to foreign loans threatened to undermine their health.”

The Director, Bank Examination Department at the NDIC, Mr. Adedapo Adeleke, explained that while the banking sector NPL ratios and the volume of non-performing loans continued to grow up till Sept, 2017, the total loans advanced by the sector continued to decrease in volume as banks curtailed lending and concentrated on loans recovery drives.

He said the Risk Assets examination of 20 Deposit Money Banks (DMBs) as at December 31, 2016, revealed that of the total sector loans portfolio of N15.6 trillion, the sum of N3.1 trillion(or 19.91 per cent) was non performing.

“The 19.91per cent NPL ratio was a 79.04per cent increase over the average sector ratio of 11.12per cent recorded as at December 31, 2015.”

Adeleke during a media workshop organised by NDIC for finance reporters in Kano, said the increased Non-performing Loans in the banking sector were worrisome for an sector that has battled head winds through the years and suffered colossal losses due to bad loans.