NDIC Boss Raises Red Flag As Toxic Loans In Nigerian Bank Hits 10%

Says N740bn Insider, Director Related NPL Unhealthy
• Urges Regulators To Check Governance Abuses

Alhaji Umaru Ibrahim, Managing Director/Chief Executive of the Nigeria Deposit Insurance Corporation (NDIC), has expressed worry over the resurgence and unhealthy growth in Non-Performing Loans (NPL), particularly the level of delinquent insider related credits in the nation’s banking industry, which he said has reached toxic level.
In an update on the state of the Nigerian banking system before the House of Representatives Committee on Insurance and Actuarial Matters, Ibrahim said as at December 2016, Nigeria’s 25 Deposit Money Banks (DMBs) recorded total loans portfolio of N18.53 trillion, out of which N1.85 trillion or 10% were none performing, double the regulatory threshold.
Worse still, he continued, is the alarming N740 billion or 40% of the NPL that were obtained by bank insiders, including those related to top management or the directors, noting the consequence of this on the stability of the nation’s banking system
A statement by Hakeem Olawale Bakare, for the corporation’s Head of Corporate Affairs, said Ibrahim noted that although the industry indicated strong fundamentals in regulatory assessment and rating, regulators were concerned about the rising tide of NPLs in the banking system.
It would be recalled that following the 2009 stress testing of banks undertaken by the Central Bank of Nigeria (CBN), so many banks were found to be exposed to their directors, following which insider related credits and the identity of the debtors were to be disclosed in their annual reports to shareholders.
The evil of toxic loans he continued, also showed among the nation’s 978 MFBs with total loans and advances of N195 billion, out of which N87.75 billion or 45% were NPLs, and N68.25 billion or 35% constituted Insider related/Directors loans.
“The NPLs indicated a classic case of over-lending, accumulated interests charges and poor corporate governance,” the statement noted, adding that the industry’s total deposits liabilities for the period was N158 billion.
Nigeria’s 42 primary mortgage banks (PMBs), he said, had a peculiar problem of over-lending, accumulated interests, poor corporate governance and high ratio of NPLs which stood at N51.7 billion or 55% of the total loans portfolio of N94 billion out of which N42.3 billion or 45% were Insider related/Directors loans. The segment of the financial system also recorded total deposits liabilities of N69 billion.
“The resultant effects of this negative trend would be poor earnings and erosion of shareholders fund,” Ibrahim told the Federal lawmakers, lamenting that “this development had posed serious issues bordering on corporate governance which were capable of eroding public confidence in the banking system.
He advocated for strict compliance with the existing code of ethics for bank directors and a review of the existing laws and regulations to proffer stiffer sanctions for Directors who exploit their positions and default in the payment of their credit facilities while still occupying Directorship positions in the banks.
He advocated for strict compliance with the existing code of ethics for bank directors and a review of the existing laws and regulations to proffer stiffer sanctions for Directors who exploit their positions and default in the payment of their credit facilities while still occupying Directorship positions in the banks.
Responding, Chairman of the Committee, Femi Fakeye, recalled the 2008/2009 banking crisis, urging the corporation and other regulatory authorities to come with ways to salvage the impending financial crisis.
He called on the NDIC to bring forth credible proposals for the amendment of the NDIC Act, BOFIA as well as other banking related laws that would enable the Corporation achieve greater performance in order to engender public confidence in the banking sector and ultimately guaranty financial system stability.

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