Ngozi Amuche
Non-Performing Loans (NPLs) in the Nigerian banking industry have risen to N1.212trillion in the first half (H1) of 2020, 1stnewsonline.com can report.
Analysis of the financial metric showed that NPLs increased to N1.212 trillion at the end of June 2020, from N1.059 trillion recorded in December 2019, indicating that NPLs across Nigerian banks rose by N152.4 billion or 14.38percent in six month, according to data obtained by 1stnewsonline.com from a report of the National Bureau of Statistics.
A cursory look at the report revealed that the number of loan defaulters may have started to rise across Nigerian banks.
However, at the end of H1 2020, Oil and Gas sector contributed the largest share to NPLs in Nigerian banks, recording a significant 22.2percent increase in NPLs from N219.91 billion recorded at the end of Q4 2019, to N268.79 billion in Q2 2020.
Construction recorded a 93.4percent increase, from N86.79 billion in Q2 2019 to N167.86 billion in Q2 2020.
One of the biggest contributors to NPLs in Nigerian banks was Commerce and Trade, as it recorded a significant 17.5percent rise from N146 billion to N171.55 billion at the end of Q2 2020.
Meanwhile, despite the rise in NPLs across critical sectors, some other sectors, including agriculture, transportation, power & energy, and education recorded a decline.
Market observers said the recent upward trend in Non-Performing Loans is mostly attributed to non-payment of loans by bank obligors due to the COVID-19 induced lockdown.
“Nigerian banks have also seen their asset quality decline due to the fall in oil prices,” they explained.
Recall that the Central Bank of Nigeria, earlier in the year, cut a deal with the commercial banks as they were granted regulatory forbearance in the restructuring of loans.
Over 33percent of industry loans are expected to be restructured as part of the deals, signalling the spate of economic crunch that has hit the private sectors.
A further deterioration in asset quality is likely to occur, particularly for vulnerable sectors like Oil and Gas, Manufacturing and Agriculture. “This may however be mitigated by the planned restructuring of 33 percent of industry loans,” the report highlighted.
Despite the headwinds expected, the CBN appears satisfied with the level of non-performing loan ratios as highlighted in its July monetary policy communique.
According to the apex bank, “The Committee noted the decrease in NPLs ratio to 6.4 percent at end-June 2020 from 9.4 percent in the corresponding period of 2019, on account of increased recoveries, write-offs and disposals.
“The Committee expressed confidence in the stability of the banking system and urged the Bank to monitor the compliance of Deposit Money Banks (DMBs) to its prudential and regulatory measures to sustain the soundness and safety of the banking industry.”