Non-Performing Loans Climb by N50bn in 2 Months Over Credit Growth

 

The value of the non-performing loans of banks leapt to N1.17 trillion in August, N50 billion or 4.64% higher than the N1.12 trillion reported in June, data from the National Bureau of Statistics (NBS) and the Central Bank of Nigeria has shown.

 

The growth derived from expansion in the total lending to the economy which grew to N19.33 trillion from N18.9 trillion within the period.

 

Non-performing loans accounted for 6.4% of the total exposure of banks as of June 2020 but declined to 6.1% last month.

 

“The committee also noted the decrease in the NPLs ratio to 6.1 per cent at end-August 2020 compared with 9.4 per cent in the corresponding period of 2019 due largely to recoveries, write offs and disposals,” CBN Governor Godwin Emefiele said at the announcement of the Monetary Policy Committee decisions on Tuesday.

Also Read: Nigerian Banks Unlikely to Boost Lending Despite CBN’s Biggest Policy Rate Cut in 6 Years 

The apex bank’s loan to deposit ratio policy has spurred an upsurge of 22.9% in credit to economic sectors from N15.57 trillion to N19.33 trillion from end of May 2019 to the same period of August 2019. Critics of the “forced lending” policy point out that banks cannot safely or profitably increase lending given the myriad weaknesses of monetary and fiscal policy which create risks rather than opportunities for entreprises and deep structural barriers in sectors like real estate which should ordinarily be big magnets for loans. The government has been charged to initiate economic reforms that would unleash growth and opportunities for investment rather than have the CBN put pressure on banks to risk shareholders’ funds.

 

On Tuesday, the regulator modified its monetary policy rate, the rate at which it lends to bank, by 100 basis points from 12.5% to 11.5%, an expansionary move seeking keep off a possible recession and buoy economic growth following the coronavirus pandemic.

 

Industry watchers and investors will now be looking to the economic impact of the policy shift on the money and the capital markets in the near term.

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