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Non-performing Loan Ratio Crashes to 13.4%

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bank loans
  • Non-performing Loan Ratio Crashes to 13.4%

As economic recession continues to weigh on the banking sector, non-performing loans ratio in the banking industry has crashed further above the Central Bank of Nigeria’s five per cent threshold.

The NPLs ratio fell to 13.4 per cent in September 2016, up 11.7 per cent recorded in June 2016, according to a Bloomberg report.

The industry-wide NPLs ratio had hit 5.3 per cent in December 2015, exceeding the prudential limit of 5.0 per cent, the CBN Financial Stability Report for the first half of last year revealed.

Specifically, the NPLs in the period under review grew by 158 per cent from N649.63bn at end-December 2015, to N1.679tn at end-June 2016, the CBN report showed.

The Group Managing Director, Access Bank Plc, Mr. Herbert Wigwe, predicted that the level of troubled loans would continue to climb before an economic recovery in the second half of the year would bring relief to the banks.

“Across the entire industry, you’ll see an uptick in non-performing loan ratios,” Bloomberg quoted Wigwe as saying in a report on Friday.

“We are better than most,” the Access Bank GMD added.

Access Bank, the country’s fourth-largest bank by assets, expects that its NPLs will climb to “slightly below” three per cent of total loans by the end of this year, compared with 2.1 per cent for the nine months through September last year.

The picture is not as rosy for the rest of the industry as lower crude prices and foreign-currency shortages cause the economy to contract.

Wigwe said the lender was targeting companies that sourced their raw materials locally for loans to reduce the risk of unpaid debt.

First Bank of Nigeria Limited, the country’s biggest lender by assets, stood out among the largest banks with an NPL ratio of 22.8 per cent at the end of September last year.

Zenith Bank Plc, United Bank for Africa Plc and Guaranty Trust Bank Plc had the NPL ratios ranging from 2.2 per cent to 4.1 per cent.

Capital levels also decreased. The sector’s capital adequacy ratio fell to 14.7 per cent in June from 16.1 per cent in December 2015.

For big banks, which the CBN classified as having more than N1tn of assets, the ratio fell to 15.65 per cent, still above the requirement of 15 per cent.

According to Wigwe, conditions in the economy should start improving in the second half of the year if monetary and fiscal measures take hold.

The CBN left its benchmark interest rate unchanged at a record 14 per cent in November as it seeks to contain inflation that rose to the highest level in more than a decade, with President Muhammadu Buhari planning to boost spending this year by 20 per cent to revive growth.

The Access Bank GMD said the lender had managed to get into an “extremely liquid” position by raising N35bn in the last quarter of 2016 by tapping a N100bn commercial bond programme.

“We will continue to raise until we can get to that programme limit; some of it may mature, which we will repay, then raise again,” Wigwe said.

“The whole idea is that we must always have that liquidity buffer,” he added.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Economy

Nigeria’s Plan to Review Oil Companies’ Gas Flaring Strategies

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Oil

Nigeria is ramping up its efforts to address environmental concerns in the oil and gas sector with a comprehensive plan to review gas flaring strategies of international and indigenous oil companies.

The Minister of State for Environment, Dr. Iziaq Salako, announced this initiative during a national stakeholders engagement meeting on methane mitigation and reduction held in Abuja, Investors King reports.

Gas flaring, a common practice in the oil industry, releases methane—a potent greenhouse gas—into the atmosphere, contributing to climate change and posing health risks to communities near oil facilities.

Nigeria aims to end routine gas flaring by 2030, aligning with global climate goals and commitments.

Dr. Salako explained the importance of reducing methane emissions and highlighted the detrimental effects on public health, food security, and economic development.

He outlined practical steps being taken to tackle methane emissions, including the development of methane guidelines and the engagement of government institutions.

The ministry, through the National Oil Spill Detection and Response Agency, will conduct periodic reviews of oil companies’ plans to ensure compliance with the gas flaring deadline.

Deloitte management consultants will assist in conducting comprehensive forensic audits to scrutinize the legitimacy of forward-contracted transactions.

President Bola Tinubu’s commitment to environmental sustainability underscores the government’s dedication to addressing climate change and fulfilling its multilateral environmental agreements.

The engagement event served as a platform for stakeholders to discuss methane mitigation strategies, existing policies, and implementation challenges.

Collaboration and dialogue among diverse sectors are crucial in charting a unified course towards sustainable methane reduction in Nigeria’s oil and gas industry.

As the country navigates its environmental agenda, ensuring accountability and transparency in gas flaring practices remains paramount for achieving a greener and healthier future.

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Economy

Interest Rate Jumps to 24.75% as CBN Takes Aggressive Stance Against Inflation

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Dr. Olayemi Michael Cardoso

The Central Bank of Nigeria (CBN) has announced a significant increase in the monetary policy rate, known as the interest rate, to 24.75%.

This move disclosed by CBN Governor Olayemi Cardoso during the 294th Meeting of the Monetary Policy Committee press briefing in Abuja, represents a bold step by the apex bank to address the mounting inflationary pressures faced by the country.

With inflation soaring to 31.70% in February, the CBN aims to moderate this upward trend by tightening its monetary policy stance.

This decision follows the previous hike in the interest rate to 22.75% in February, showcasing the CBN’s commitment to combatting inflationary forces.

While the bank opted to maintain the Cash Reserve Ratio at 45%, the significant increase in the interest rate underscores the urgency of the situation and the need for decisive action.

Governor Cardoso emphasized that these measures are essential to stabilize the economy and safeguard the purchasing power of the Nigerian currency.

The 294th MPC marks the second meeting under Governor Cardoso’s leadership, indicating a proactive approach to addressing economic challenges.

The next MPC meeting is scheduled for May 20th and 21st, 2024, highlighting the ongoing commitment of the CBN to navigate Nigeria’s economic landscape amidst inflationary pressures.

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Economy

Nigeria Braces for 10th Consecutive Interest Rate Hike by Central Bank

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Central Bank of Nigeria (CBN)

As Nigeria grapples with persistently high inflation, the Central Bank of Nigeria (CBN) is gearing up to implement its tenth consecutive interest rate hike in a bid to curb the soaring prices and attract investment.

Analysts surveyed by Bloomberg are anticipating a substantial 125 basis-point increase in the key rate to 24%, marking one of the most significant adjustments in the current tightening cycle.

The decision, expected to be announced by Governor Olayemi Cardoso on Tuesday at 2 p.m. in Abuja, comes on the heels of inflation accelerating to 31.7% in February, far surpassing the central bank’s target range of 9%.

This surge has been primarily attributed to the sharp depreciation of the naira, prompting authorities to devalue the currency twice since June to narrow the gap with the unofficial market rate and encourage investor confidence.

While these measures have seen the naira strengthen in recent days and bolstered investment inflows, including a fourfold increase in overseas remittances and significant foreign investor portfolio asset purchases, there remains a palpable need for more decisive action.

Giulia Pellegrini, a senior portfolio manager at Allianz Global Investors, emphasized the necessity for the CBN to intensify its tightening efforts to regain foreign investors’ confidence in the local bond market.

While acknowledging the positive strides made by the central bank, Pellegrini stressed the importance of a more assertive approach to prevent the diversion of investor attention to other frontier markets.

As the Nigerian economy navigates through these challenging times, the impending interest rate hike signals the CBN’s determination to address inflation head-on and foster a more stable economic environment.

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