Commercial Banks Write Off N1.9trn in Bad Debts

Agusto & Co, a credit rating agency, said banks have written off about N1.9 trillion bad loans from their books in the last four years.

In the report titled, “2020 Banking Industry Report” and released on Sunday, the credit rating agency linked the banks’ actions to weak macroeconomic fundamentals and the introduction of the International Financial Reporting Standard 9 (IFRS 9).

Agusto & Co, attributed the development to the global health pandemic that impacted the quality of assets and significantly exposed vulnerable sectors.

Still, the report noted that Deposit Money Banks and merchant banks continued to lend, even with the huge write-offs. It noted that the total credit to the economy expanded by N3.33 trillion to N18.90 trillion at the end of June 2020, up from N15.56 trillion achieved in May 2019. sector increased

Most of the loan goes to the productive sector of the economy. The report listed the manufacturing, consumer credit, general commerce, and information and communication and agriculture sectors as beneficiaries of improved credit facility.

The report said: “Our assessment of the industry’s financial condition is based on figures and information published in the approved annual reports of 19 commercial banks and five merchant banks as at 31 December 2019.

“These banks collectively accounted for an estimated 98 per cent of the industry’s total assets as at the same date and provide a good representation of the Industry.”

“In the last four years, following the 2015/2016 recession, the Nigerian banking industry has written off a minimum of N1.9 trillion of impaired loans from its loan portfolio. This volume of write-offs has been driven by the weak macroeconomic climate and the introduction of the IFRS 9 accounting standard in 2019. In the wake of the unprecedented COVID-19 pandemic, the Industry’s asset quality is further threatened given significant exposures to vulnerable sectors,” it said.