Banks’ Non-Performing Loans (NPL) is on downward swing in the first nine months of 2020 despite weak economic activities characterized by the impacts continuous insecurity, COVID-19 pandemic and EndSARS protests.
Besides, In the review period, some banks have not fully commenced operations and could not grant loans to the real sector.
However, reports of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) indicated 6.1 percent NPL as at end of August 2020 compared with 9.4 percent in the corresponding of 2019 due largely to recoveries, write-offs and disposals.
The Committee, which advocated further expansion in credit to employment-generating sectors to expedite growth recovery urged the Central Bank of Nigeria (CBN) to sustain its regulatory surveillance over the banking system to ensure that NPL remains low.
The apex Bank’s Head, Investment Research and Business Development, Moses Ojo, stressed that banks were aggressive in loan recovery, stressing that some were observing preventive measures in lending to the real sector as directed by CBN.
“The decline can be attributed to the aggressiveness of banks in pursuing toxic bad loans and conservative measures’ in granting loans despite the 65 percent Loan- to-Deposit ratio(LDR) policy of the CBN.
Most banks preferred to be sanctioned rather than meet the 65 percent LDR policy that tends to increase their NPL ratio amid the weak economy this year. These measures by banks have accounted for the decline in NPL ratio in the system.”, says Ojo
Our Correspondent gathered that Union Bank of Nigeria Plc reported a 2.2 percent decline in NPL to 3.6 percent as of September 30, 2020, from 5.8 per cent reported in the 2019 financial year.
The CBN had last year imposed sanctioned 12 Nigerian banks for breaching the regulator’s directive on lending to the real sector of the economy. The apex Bank debited a combined sum of N499.1 billion from the vault of the banks at zero percent interest rates. Most analysts see this as a penalty on the affected banks.
Commenting of the NPL, the Chief Financial Officer, Union Bank of Nigeria, Mr. Joe Mbulu said, “Our asset quality continues to improve with NPL down to 3.6 percent from 5.8 percent as of December 2019, supported by ongoing efforts to diversify our loan book to include variable businesses and households.”
Guaranty Trust Bank plc reported an NPL ratio that closed flat at 6.5 percent in September 2020 from 6.5 percent reported in December 2019. Also, FBN Holdings reported an NPL ratio of 8.8 percent as of September 30, 2020, from 9.9 percent reported in 2019 full-year result and accounts.