One revelation of the Central Bank of Nigeria (CBN) audited report for the year ended December 31, 2017, is the worsening Non-Performing Loans (risk assets) level in the nation’s banking industry.
From just 2.9% in 2014, an improvement from previous year’s 3.2%, non-performing loans as a percentage of total industry credit has weakened to 14.8% at the end of the year under review.
From 2.9% in 2014, the level, according to the CBN data ballooned to 4.9% the following year and then soared by almost 300% to 12.8% in 2016 and further to 14.8% last year.
Although tolerable NPL level remains 5%, there banks that reported 17% and even more at the end of 2017.
To accentuate the level of the worry, members of the CBN’s Monetary Policy Committee (MPC) in their personal comments at the first meeting of the year on April 4, variously identified bloating NPL as a notable red flag, especially as it had risen to 16.21% by February 2018. This, they blame for fragility among Nigerian banks, just as the continued delay in passage of the 2018 Appropriation Bill by the National Assembly.
Edward Lamtek Adamu, a CBN deputy governor and committee member, agreed with Adebayo Adelabu, now retired Deputy Governor, that NPL growth among banks is assuming worrisome dimension in the aftermath of the 2015 slump in crude oil price, at a time most of the banks are heavily exposed to the upstream segment of the sector.
Bank credit to the private sector, Adebayo noted, remains “exceptionally weak over the last three years on account of constraints imposed by rising NPLs, among other factors.”
The CBN report also showed that industry average CapitalAdequacy Ratio (CAR) fell from 14.8% in 2016, to 10.2% at end-December 2017, while industry average Liquidity Ratio (LR), improved from 43.9% in 2016 to 45.6%, staying above the 30% regulatory minimum by 15.6 percentage points.
At the end of 2017, the number of borrowers on the Credit Risk Management System (CRMS) database at the end of December 2017, has grown by a robust 430.5% from just 147,828 in the corresponding period of 2016 to 784,172.
Of this number, 752,692 were individuals, while 31,480 were corporate borrowers.
Total number of credit facilities reported on the database rose from 516,848 in 2016 to 2,692,403 in 2017, consisting of 2,263,109 and 429,294 facilities granted to individuals and corporates, respectively.
“Thus, the number of borrowers, with outstanding facilities, rose by 1,113 per cent to 1,418,081 in 2017, from 127,374 in 2016. The significant increase also reflected the effect of stricter regulations and enhanced enforcement, thereby improving the transparency and credibility of the overall debt profile in the industry.
Also, the CBN said it intensified supervision of the three existing private credit bureaux (PCBs), with average number of records at 47.2m in 2017, reflecting 0.85% growth over the 46.8m in 2016, attributed to increased compliance, following the passage of the Credit Reporting Act.
Number of borrowers and value of outstanding credit, however, declined from 16.03m and N24.07tr in 2016, respectively, to 15.33m and N23.86tr in 2017, a development that reflected reduced credit activities in the review period.