The volume of non-performing loans (NPL) in the Nigerian banking industry is expected to rise to as high as N2.3 trillion when the banks begin to release their full year 2016 financial statement as the NPL ratio is expected to rise above 15 per cent.
Thank you for reading this post, don't forget to subscribe!According to data by the National Bureau of Statistics, banking sector credit by the end of last year stood at N15.7 trillion. As at June 2016, average NPL in the industry was put at 11 per cent by the Central Bank of Nigeria (CBN), way above the regulatory limit of five per cent.
Operators in the industry said the ratio is expected to further rise to 15 per cent by year end as the economic challenges of the country increased the incidences of bad loans.
As stipulated by the CBN, the threshold for NPL to total loan portfolio ratio is 5 per cent. It implies that any bank, which has its NPL ratio rise beyond the 5 per cent threshold in its book, is bearing such proportion of loans above the threshold as toxic assets or bad loans.
Concerned about the rising NPL in the banking industry, the Nigeria Deposit Insurance Corporation (NDIC) had disclosed that the commission in collaboration with the CBN is looking into the creation of a private bad bank which would salvage the industry from the rising bad debt profile.
As at September 2016, 14 banks which had presented their third quarter results had set aside N288 billion as impairment on loan losses although bad debt ratio to loans as at June 2016 was 11.7 per cent amounting to N1.727 trillion of the N15.7 trillion gross loans of the banking sector in the first half of 2016.
The banking industry had been largely affected by the decline in oil prices as the oil and gas sector had the largest portion of banking industry credit.
Meanwhile, the Senate yesterday moved to strengthen financial institutions in the country as it held a one day public hearing to fashion out a framework for the amendment of three bills related to Banking Insurance and other financial institutions.
President of the Senate, Dr Bukola Saraki who was represented by the leader of the Senate, Sen Ahmed Lawal said the eighth Assembly will do everything necessary to make doing business easy in Nigeria.
He said the Senate is committed in making small business investment thrive as well as create more jobs for Nigerians.
The bills include the credit bureau service bill 2017, the National payment system bill 2017 and the foreign exchange monitoring and miscellaneous provisions act 2017.
In his remarks, chairman of the committee on Banking, insurance and other financial institutions, Sen Rafiu Ibrahim stated that amending the acts was necessary adding that it will help provide a level playing field for the banking businesses.
The hearing according to the committee chairman is a measure of the seriousness the Senate attaches to the nation’s economy.
A representative of the Vice President, senior special assistant to the president on Industry, Trade and Investment, office of the Vice President, Jumoke Oduwole, said the goal of the administration is to encourage doing business in Nigeria with ease.