• Govts, Oil Firms, Manufacturers Borrow N8.24tn From Banks

The oil and gas sector, governments and manufacturers account for the large chunk of loans from Nigerian banks as of the end of March this year.

The total loans given to the oil and gas, manufacturing sectors and governments by banks in the country stood at N8.24tn at the end of March.

Latest data obtained from the National Bureau of Statistics revealed that loans given to the oil and gas sector stood at N4.686tn, while the governments got N1.368tn.

The manufacturing sector got a loan of N2.241tn, while general commerce received N1.035tn.

Loans to the general, finance and insurance, and power and energy sectors stood at N1.019tn, N954.68bn and N683.93bn, respectively while agriculture, forestry and fishing sector and construction sector got N648.89bn and N642.87bn, respectively.

Information and communication sector and the real estate sector secured N607.95bn and N599.39bn loans respectively.

Loans to transportation and storage sector stood at N213.94bn, while capital market got N227.28bn.

The professional, scientific and technical services industry secured a loan of N170.92bn, while public utilities and the education sector got N78.91bn and N58.4bn, respectively.

Loans to the human health and social work sector stood at N23.09bn; water supply, sewerage, waste management and remediation activities sector got N22.68bn; and arts, entertainment and recreation sector received N11.34bn.

The mining and quarrying sector and extraterritorial organisations and bodies got N8.97bn and N0.03bn, respectively.

The banking sector’s non-performing loans stood at N1.676tn as of the end of March 2019, according to the NBS.

The gross loans recorded in the banking sector stood at N15.480tn, while the loans after specific provisions stood at N13.739tn in the period under review.

The ratio of the NPLs to total loans was 10.83 per cent, while the ratio of NPLs to total loans after specific provisions was 12.2 per cent

The total amount of NPLs at the end of 2018 was N1.792tn, while the gross loans and loans after specific provisions were N15.353tn and N13.562tn, respectively.

Banks’ NPLs fell by six per cent from 15 per cent in June 2017 to nine per cent in May 2019, the Central Bank of Nigeria said.

The apex bank said capital adequacy ratio for the banking industry improved from 11 per cent in June 2017 to over 16 per cent in May 2019 and liquidity level also increased by over 20 per cent within the same period.

The CBN, Godwin Emefiele said, “In addition, the ratio of non-performing loans in the banking system has reduced from 15 per cent in June 2017 to nine per cent in May 2019, due to concerted efforts by the CBN and the Deposit Money Banks, although more work is being done to moderate NPL levels to the maximum prescribed level of five per cent.

“Our financial institutions are well-positioned to perform their intermediation role, which will ultimately help in supporting the growth of our economy.”

He said the drop in commodity prices affected a good number of banks given their exposure to the oil and gas sector, and this resulted in an increase in banks’ NPLs.

According to the CBN, as a result of risk management measures embarked upon by it, capital adequacy and liquidity ratios of commercial banks are now above the prudential levels.

The Managing Director/Chief Executive Officer, Asset Management Corporation of Nigeria, Mr Ahmed Kuru, recently expressed concerns over the resurgence of huge toxic loans in the banking sector.

He called on the authorities to revisit the Failed Bank Act so that operatives in the banking sector would be made to account for their actions.

He also urged banks to immediately strengthen their risk management frameworks to stem the negative growth.

Kuru explained that given the huge resources that were available to financial institutions and the pivotal role they played in the development of the economy, it became mandatory for financial institutions to take the issues of risk management seriously to prevent what happened during the global financial crisis.

He suggested that in line with the fight against corruption, there was a need to address impaired and arranged credits so that operators would be held responsible for booking credits contrary to their credit policy that went bad under their supervision.

He noted that one of the reasons for the failure of the banking system during the global financial crisis of 2008/2009, which eventually led to the creation of AMCON, was the prevalence of weak risk management framework by financial institutions.

The Chairman, Independent Corrupt Practices and Other Related Offences Commission, Prof. Bolaji Owasanoye, said recently that the commission would collaborate with AMCON to recover debts.

He said the huge debts had become existential challenge for the country since the few people who were the debtors were still walking free and waxing strong in the society.

Considering the positive impact the funds would have in the economy if recovered, Owasanoye said the time had come for the ICPC and other relevant sister agencies to partner AMCON and support the debt recovery drive.

He said, “We have to be practical in our approach. Something needs to be done and very fast too given the approaching AMCON sunset because this is public funds we are talking about here. We need AMCON and ICPC to work closer and develop a strategy that would work.

“We need the public to know the opportunity cost of the huge debt to the Nigerian economy, we need to share information as sister agencies locally and internationally and treat this matter as a last lap race by setting up a joint taskforce to deal with this sobering issue.”