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N8.1tn Bad Loans: MPC Urges CBN to Develop Recovery Framework



  • N8.1tn Bad Loans: MPC Urges CBN to Develop Recovery Framework

The Monetary Policy Committee of the Central Bank of Nigeria has directed the apex bank to develop a comprehensive administrative, legal and regulatory framework to speed up the recovery of delinquent loan facilities in the banking system.

It called on the CBN to engage relevant stakeholders and authorities in order to mitigate credit risk and ultimately open up the credit delivery space in the Nigeria economy.

The CBN Governor, Mr Godwin Emefiele, disclosed this on Tuesday while addressing journalists shortly after the two day committee’s meeting, which was held at the apex bank’s headquarters in Abuja.

Based on figures released by the National Bureau of Statistics, the banking sector recorded a total amount of N8.17tn as non-performing loans in the 2018 fiscal period.

The banking sector’s N8.17tn NPLs for 2018 decreased by N1.38tn when compared to the N9.54tn, which the banking sector recorded as NPLs in the 2017 fiscal period.

Emefiele explained that while the NPL ratio in banks had moderated, it remained above the prudential benchmark.

He said, “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.”

He added, “If you recall, the prudential is that banks must not have more than five per cent in NPL.

“But I must say that at this time, it’s about nine to ten per cent 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 per cent and moderated to ten per cent and we say it’s a substantial and an encouraging improvement in a 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.

The CBN governor said the move would help to redirect the lending focus of banks to the private sector and boost the much needed growth in the economy.

He said the abundant opportunities available to banks for unfettered access to government securities was crowding out private sector lending, adding that there was a need for banks to start lending to employment-creating and growth-stimulating sectors of the economy.

He said although output growth in the first quarter was slower than 2.38 per cent recorded in the preceding quarter, there was existence of spare capacity for non-inflationary growth in the economy.

This opportunity, he noted, should be explored through increased credit delivery to the private sector.

Emefiele said that the committee urged the relevant authorities to stiffen efforts to address the security challenges and improve food production.

The committee, according to him, also encouraged financial intermediating institutions to ensure that loans to the agricultural sector were channelled effectively to end users.

Not impressed by the flow of credit from Deposit Money Banks to the private sector, Emefiele said the committee called on the CBN management to urgently put in place modalities to promote consumer and mortgage lending in the Nigerian economy.

He said the MPC had given the management the mandate to promote consumer lending, adding that the apex bank would hold very informed and strategic engagement with DMBs to achieve this objective.

He noted that boosting the level of consumer credit would greatly and positively impact on the flow of credit and ultimately result in output growth.

He said, “In view of the abundant opportunities available to banks for unfettered access to government securities, which tends to crowd out private sector lending, the Committee called on the CBN to provide a mechanism for limiting DMBs’ access to government securities so as to redirect bank’s lending focus to the private sector. This will spur the much needed growth in the economy.

“The truth is that, according to our own regulations, there is a particular minimum percentage of treasury bills or government securities that the bank must invest in order to remain liquid.

“But again, we have observed and unfortunately too and increasingly so that the banks rather than focusing on granting credit to the private sector, they tend to direct their focus to mainly in buying government securities.

“The MPC has frowned upon that and has directed the management of the CBN to put in place policies or regulations that will restrict the banks from limited access to government securities.

“It is important and expedient that the MPC gives this directive to the management of the CBN because this country badly needs growth.

“For us to achieve growth, those whose primary responsibilities it is to provide credit, who act as intermediaries in providing credit, and are the catalyst to the economy, must be seen to perform that responsibility.

“And that they (Money Deposit Banks) would rather than performing that responsibility to the private sector that is the engine growth of an economy, they would be directing their liquidity to other sectors of the economy is what the MPC frowns upon and, therefore, given the management of Central Bank the power to limit their propensity or their appetite for just going for government securities rather than directing credit to private sector of the economy.”

In the area of fiscal policy, the apex bank boss said the committee called on the Federal Government to urgently build fiscal buffers through a more realistic benchmark oil price for the Federal budget.

He said, “The oil benchmark is about $60 per barrel that has been budgeted for at 2.3 million barrels per day.

“Now that price is almost at $70, what we are saying is that there is no need to begin to say let us spend if we make more money and so increase the budget benchmark maybe from $60 per barrel to $69 per barrel because you believe that price is good.

“What that does, for instance, the buffer between $72 or $74 that it is right now and the $60 budgeted, if you realised the money, save it and build a buffer for a rainy day when it does happen.”

Speaking on the outcome of the MPC meeting, the CBN governor said that the committee decided to leave the Monetary Policy Rate unchanged at 13.5 per cent.

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

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Nigeria’s Public Debt Hits ₦121.67 Trillion as Borrowings Surge – DMO



The Debt Management Office (DMO) of Nigeria has announced that the country’s total public debt has risen to ₦121.67 trillion ($91.46 billion) as of March 31, 2024.

This represents an increase of ₦24.33 trillion from the ₦97.34 trillion ($108.23 billion) recorded at the end of December 2023.

The surge in debt is attributed to both domestic and external borrowings by the Federal Government, the 36 state governments, and the Federal Capital Territory (FCT).

The DMO’s report reveals that Nigeria’s domestic debt now stands at ₦65.65 trillion ($46.29 billion), while the external debt is ₦56.02 trillion ($42.12 billion).

The DMO noted that the rapid increase in public debt is largely due to new borrowing to partially finance the 2024 Budget deficit and the securitization of a portion of the ₦7.3 trillion Ways and Means Advances at the Central Bank of Nigeria (CBN).

“The increase was from new borrowing to part-finance the 2024 Budget deficit and securitization of a portion of the ₦7.3 trillion Ways and Means Advances at the Central Bank of Nigeria,” the DMO stated.

Despite the rising debt, the DMO remains optimistic about future debt sustainability, contingent on improvements in government revenue.

“Whilst borrowing, as provided in the 2024 Appropriation Act, will continue, we expect improvements in the Government’s Revenue to enhance debt sustainability,” the DMO added.

The increase in debt comes at a time when President Bola Tinubu is preparing to present the 2024 Supplementary Budget to the National Assembly.

This follows the President’s approval of the ₦28.7 trillion 2024 Appropriation Bill on January 1, 2024, which was ₦1.2 trillion higher than the budget originally proposed in November 2023.

The 2024 budget, dubbed the “Budget of Renewed Hope,” set ambitious targets, including pegging the oil price at $77.96 per barrel and estimating daily oil production at 1.78 million barrels.

However, the naira has faced severe depreciation, plunging to nearly ₦2,000/$1 in February, before stabilizing around ₦1,500/$1.

Economic analysts warn that the escalating debt and currency depreciation could pose significant challenges to Nigeria’s economic stability.

The government’s ability to manage its borrowing and stimulate revenue generation will be critical in navigating these fiscal pressures.

As Nigeria grapples with these economic realities, the focus remains on finding sustainable solutions to manage the growing debt burden while fostering economic growth and stability.

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Banking Sector

Federal High Court Sets Date for Contempt Hearing in GTB vs. AFEX Loan Case



The Federal High Court in Lagos has scheduled June 27, 2024, for the next hearing in the ongoing contempt suit filed by Guaranty Trust Bank Plc (GTB) against directors of AFEX Exchange Commodities Limited.

The case revolves around a disputed N17.81 billion loan obtained under the Central Bank of Nigeria’s Anchor Borrowers’ Programme.

Presiding over the court, Justice Chukwujekwu Aneke set the date following a session where arguments were presented by the plaintiff’s lead counsel, Mr. Ade Adedeji (SAN), and the respondent’s counsel, Prof. Olawoyin (SAN).

The core issue pertains to the alleged disobedience of a court order by the directors of AFEX Exchange Commodities Limited.

GTB, through its counsel Ajibola Aribisala (SAN), has accused AFEX and its directors—Ayodele Balogun, Jendayi Fraaser, Justin Topilow, Mobolaji Adeoye, and Koonal Ghandi—of contempt for failing to comply with a court directive.

The bank alleges that these directors did not appear in court as mandated, which led to the initiation of contempt proceedings.

During the latest session, Adedeji emphasized the necessity for the directors to appear in person, stating, “My lord, the parties in contempt are not in court. The contemnors cannot sit in the comfort of their homes and send a lawyer to court in contempt proceedings. The law is trite that they must appear before the court.”

In response, Olawoyin argued that he had only recently been briefed on the matter and was not fully aware of the prior developments.

He noted that some of the individuals listed as directors were no longer with the company, adding that one current director, Mr. Akinyinka, was present in court, while another was on pilgrimage.

The contempt case traces back to a suit marked FHC/L/CS/911/2024, where GTB sought to recover the loan amount through legal measures.

On May 27, Justice Aneke granted an interim Global Standing Instruction (GSI) injunction, which directs over 20 banks to transfer funds credited to AFEX into its account with GTB until the debt is settled.

Also, the court authorized GTB to take possession of AFEX’s 16 warehouses across seven states and sell the commodities stored within, as these were procured using the CBN’s loan facility.

The N17.81 billion loan comprises N15.77 billion in principal and interest outstanding as of April 17, 2024, and an additional N2.04 billion covering recovery costs and incidental expenses.

As the court prepares for the next hearing, the financial and legal communities are closely watching the proceedings.

The outcome will significantly impact not only the involved parties but also set a precedent for handling similar cases in the future.

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Banking Sector

CRC Credit Bureau Celebrates 15 Years with Record 14% Credit Penetration in Nigeria



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CRC Credit Bureau Limited celebrated its 15th anniversary with a record 14% credit penetration rate.

The occasion was marked with the CRC Finance and Credit Conference 2024 held in Lagos, where key industry stakeholders gathered to reflect on the bureau’s journey and discuss future trends in credit risk management.

Founded in January 2010 and licensed by the Central Bank of Nigeria (CBN), CRC Credit Bureau has played a pivotal role in enhancing access to credit across Nigeria.

Dr. Tunde Popoola, the Group Managing Director/CEO of CRC Credit Bureau Limited, highlighted the bureau’s journey, noting that from its inception with a single product, CRC has expanded its offerings to 18 products covering all aspects of the lending value chain.

Speaking at the conference, Dr. Popoola underscored the bureau’s contribution to Nigeria’s financial sector, stating, “CRC Credit Bureau has been instrumental in transforming access to credit in Nigeria over the past 15 years. We started with a vision to simplify credit access through reliable data and have since grown to serve millions of Nigerians.”

The event focused on the theme “Sustainable Financing Options: Innovations in Credit Risk Management,” emphasizing the importance of sustainable finance amid economic challenges.

The conference provided a platform for stakeholders to discuss strategies for mitigating risks and enhancing the efficiency of credit operations in Nigeria.

Reflecting on the current state of credit penetration, Dr. Popoola noted that while Nigeria has made significant progress, the 14% penetration rate still falls below global benchmarks.

He highlighted that CRC Credit Bureau currently holds credit scores for 33 million Nigerians, facilitating over 29.4 million searches in 2023 alone, with an additional 10 million searches conducted in the first quarter of 2024.

Joel Owoade, Chairman of CRC’s Board of Directors, acknowledged the economic headwinds impacting businesses in Nigeria but stressed the importance of sustainable financing to mitigate risks associated with lending.

“As we navigate economic fluctuations, sustainable financing remains crucial to fostering economic stability and growth,” Owoade remarked.

The conference also featured insights from industry experts on leveraging artificial intelligence (AI) in credit risk management and regulatory frameworks to support AI-driven innovations.

Olaniyi Yusuf, Managing Partner of Verraki, highlighted the potential of AI to create jobs and enhance economic productivity, calling for supportive regulatory environments that balance innovation with risk management.

Representatives from the Central Bank of Nigeria (CBN) emphasized the regulator’s efforts to promote sustainable credit practices.

Dr. Adetona Adedeji, Acting Director of the Banking Supervision Department at CBN, outlined initiatives such as the National Collateral Registry and Global Standing Instruction aimed at enhancing credit access while minimizing risks.

As CRC Credit Bureau looks ahead, Dr. Popoola expressed optimism about the future, stating, “We remain committed to driving greater financial inclusion and expanding credit access in Nigeria. Our focus is on leveraging technology and strategic partnerships to deliver innovative solutions that meet the evolving needs of consumers and lenders.”

The celebration of CRC Credit Bureau’s 15th anniversary underscored its pivotal role in Nigeria’s financial sector, marking a milestone in the nation’s journey towards broader financial inclusion and sustainable economic growth.

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