Data acquired from the Central Bank of Nigeria has revealed that the total amount of non-performing loans held by banks hit N1.32 trillion by the end of April 2023.
According to The Punch, data from the CBN show that this amount accounted for 4.3% of the N30.64 trillion in total credit given to the banking industry.
Following the CBN’s instruction requiring banks to improve their loan-to-deposit ratios to the public, loans in the industry have continued to rise steadily.
As of the end of December 2022, the banks’ gross credit was at N29.72 trillion, with N1.2 trillion, or 4.2% of that total, in non-performing loans.
In a statement provided by a member of the Monetary Policy Committee, Aliyu Sanusi, the CBN stated that in April 2023, “The non-performing loans ratio was 4.3 percent, which was below the statutory ceiling of five.
Additionally, the liquidity ratio was 45.3%, higher than the legal requirement of 30%. These point to the banking system’s continued stability, soundness, and resilience.
“The industry’s total assets and gross credit to the economy have maintained an upward trend, with the former increasing by N16.65 trillion or 25.88 percent year over year to N80.97 trillion in April 2023.
“Following the bank’s Loan to Deposit Ratio strategy, the overall amount of credit extended to the economy has been increasing since 2019, with a value of N30.64 trillion as of April 2023.
The CBN announced intentions to redesign the naira notes within 90 days during the fourth quarter of 2022. This created enormous hurdles for all industries and caused the country’s growth to slow down in the first quarter of 2023.
The national president of the Association of Small Business Owners of Nigeria, Mr. Femi Agbesola, said that the SMEs were facing difficulties that prevented them from repaying their loans.
He claimed that in the previous two years, the association’s 7.8 million SMEs closed their doors.
Speaking of some of the difficulties faced by SMEs, he stated, “The first is the high inflation rate, which has reduced consumers’ available capital and prevented them from making more purchases.
“This decreases SMEs’ sales and profits and makes it difficult for them to repay their debts, including loans,”
Agbesola stated, “The CBN has increased the MPR rate for the past three months, and currently it is at its highest. Due to the country’s tough economic situation, it is difficult for anyone to repay loans with such high-interest rates.
“Another issue is the rise in fuel pump prices as a result of the removal of subsidies as businesses now invest more in their operations.”
A member of the MPC, Kingsley Obiora, highlighted that the sector’s non-performing loans had decreased as a result of write-offs, facility reorganizations, global standing orders, and effective credit risk management.
He explained, “As a result, total gross credit increased by N4.54 trillion, or 19.71 percent, between the end of April 2022 and the end of April 2023, from N26.10 trillion to N30.64 trillion, as a result of the expansion of the industry’s funding base, the CBN’s directive on Loan to Deposit Ratio, as well as business strategy and competition.
“The credit growth was largely recorded in the oil and gas, manufacturing, general commerce, and government sectors of the economy.”
The CBN released the GSI guidelines in 2020, among other things, to monitor persistent loan defaulters and decrease non-performing loans in the banking industry.
The CBN claims that the GSI gave the banks the ability to recoup the unpaid principal and interest on any account kept open by the debtor across all financial institutions in Nigeria.
