Banking sector closes years with huge NPL
The banking industry will on Friday December 29, 2017 close its financials for the year with no record yet on the reduction in the sector’s huge Non-Performing Loans (NPLs).
The NPL of deposit money banks currently stood at 15.18 percent as at September 2017 from 10.13 in December 2016, while their loans and advances declined by 1.3 percent to N15.9 trillion in September 2017 from N16.1 trillion in December 2016, raw data made available by the Nigeria Deposit Insurance Corporation (NDIC) indicated.
“One could say the performance of the sector was a little choppy for 2017. New frailties emerged especially with the growth in Non-Performing Loans. The non-performance of the fiscal sector also impacted on banks. Capital Budget performed at about 15 percent – the worst in years or perhaps in Nigeria’s history. Another 35 percent has been purportedly released at the tail end of the year, but banks will close their books by 31st December”, Tope Fasua, CEO, global Analytics consulting limited said.
He said from a medium to long term view though, no new sector came up during the year that could be banked on for the next ten years. All that happened was that businesses got more tethered to government, and government became less efficient. A number of large projects were embarked upon by state and federal governments based on foreign borrowing, which “if we aren’t careful will create new vulnerabilities in the future when these loans are due. We hope 2018 will create better prospects for the industry”, Fasua added.
Over the years, Nigerian banks had concentrated lending in various industries and sectors such as oil and gas and telecommunication, buoyed by the growth in such industries and sectors.
Recent hiccups in the oil and gas sector following the crash in the international price of crude oil has resulted in some obligors in the sector being unable to service their loans.
Also, there was record of increasing rate of loan defaults in banks occasioned by economic recession witnessed in the Country during the year.
“The rise of NPLs is a salient feature of financial crises. An increasing level of NPLs in any economy impacts on the public confidence on the industry”, Adedapo Adeleke, director, bank examination department, Nigeria a Deposit Insurance Corporation (NDIC) said.
Analysts believe that closer monitoring of the credit and approval processes of the Tier-2 banks by the Central Bank of Nigeria (CBN) may be required to curtail the increasing proportion of NPLs in the banking industry.
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