Banks’ N1.23trn bad loans highest since 2019, says NBS

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Banks’ N1.23trn bad loans highest since 2019, says NBS

The National Bureau of Statistics (NBS) has disclosed that N1.23trillion bad loans reported by Nigerian Banks in 2020 was the highest since the third quarter of 2019 when N1.45trillion was reported.

The bureau in its Selected Banking Sector Data: Sectorial Breakdown of Credit, ePayment Channels and Staff Strength report on Sunday further explained that gross loans by banks was N20.48trillion as of the fourth quarter of 2020.

The NPL ratio of 6.02 percent reported by NBS as at fourth quarter of 2020 is a  marginal different from 6.01 percentper cent reported by the Central Bank of Nigeria (CBN) at end-December 2020.

NPL ratio measures the rate of bank loans that are either going bad because they are not being serviced adequately or have gone bad completely.

The apex bank acceptable NPL ratio is five percent, however, the ratio has been breached since the fall in oil prices began in the 4th quarter of 2019 and the Covid-19 pandemic broke in 2020.

The Monetary Policy Committee (MPC) had noted that the ratio remained above the prudential benchmark of five per cent and urged the Bank to sustain its regulatory measures to bring it below the prudential benchmark.

The CBN governor, Godwin Emefiele in its communiqué at the first MPC meeting of 2021 said the Committee commended the Bank for maintaining a sound regulatory surveillance over the banking system by ensuring a reasonably low level of NPLs, even with the aggressive credit expansion programme during this crisis period.

Emefiele added though, NPLs remained slightly above the prudential benchmark, members noted that the banking system remained stable, strong, and resilient.

“Given the success recorded under the LDR policy, it thus urged the Bank to sustain its risk surveillance approach and ensure the continued soundness of the banking system.”

“With the impact of the corona virus on particular sectors of the economy, it was not entirely unexpected, nevertheless it is imperative that we continue to work to ensure that banks comply with our macro-prudential framework in order to prevent further deteriorations in their loan portfolios”, Emefiele added.

The NPL ratio is one of the most important benchmarks for measuring the health of the banking sector. At above six per cent, it indicates most commercial banks are carrying more underperforming loans than expected mostly because the private sector is not servicing the loans.

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