Nigeria Central Bank Moves To Help Banks Recover 8.17 Trln Naira NPLs

The Central Bank of Nigeria (CBN) may adopt a stringent administrative, legal and regulatory framework to help banks recover all delinquent debt in their books to save the industry from imminent collapse.

Godwin Emefiele, Governor of the CBN said while the bank welcomes the improvement in the size of Non-Performing Loans (NPLs) of commercial lenders, the present level remains a concern to the regulator.
The banking industry currently reeking under the yoke of about 8.17 trillion naira NPLs as at the end of 2018. The figure was, however, better than 9.54 trillion naira in the previous year.
At current 10 percent, the NPLs of commercial lenders is far above the 5 percent recommended by prudential guidelines of the regulatory bank.
“The MPC welcomed the improvement in financial soundness indicators but noted that although the non-performing loan ratio moderated, it remained above the prudential benchmark.
“Consequently, the committee considered and recommended to the CBN a proposal to develop a comprehensive administrative, legal and regulatory framework to speed up the recovery of delinquent loan facilities of the banking system, which would involve structured engagement with relevant stakeholders and authorities in order to mitigate credit risk and ultimately open up the credit delivery space in the Nigerian economy,” Emefiele said at the end of two-day MPC meeting in Abuja on Tuesday.
“If you recall, the Prudential is that banks must not have more than five percent in NPL.
“But I must say that at this time, it’s about nine to ten percent on the average, which is a significant improvement from where it was a year or two ago.
“About a year or two ago, it was close to 15 percent and moderated to ten percent and we say it’s a substantial and encouraging improvement in the level of NPL.
“And I do think that with the steps that would be taken by the CBN to support the banks through administrative, legal and regulatory framework, certainly, we would see to it that NPLs are brought down so that DMBs are encouraged to go back and begin to lend money more aggressively to those sectors that they considered to be risky.”
Emefiele said the committee also directed the management of the apex bank to provide a mechanism for limiting Deposit Money Banks’ access to government securities.