Commercial banks’ non-performing loans average 5.4%


By Omodele Adigun

As the regulatory forbearance, which allowed banks to restructure their loan books, particularly in sectors vulnerable to the shocks of COVID-19, continues to work like magic wand, non-performing loans (NPLs) portfolio of the sector has tanked to 5.4 per cent.

This was disclosed by the Governor of the apex bank, Mr Godwin Emefiele, at the 281st Monetary Policy Committee(MPC) meeting held on September 16 and 17, 2021 in Abuja.

The NPL ratio, which measures the rate of bank loans that are either going bad because they are not being serviced adequately or have gone bad completely, opened 2021 at 6.0 per cent; 6.3 per cent at the end of February; 5.8 per cent in May and 5.7 per cent in June.

Commenting on the downward trajectory, the National Bureau of Statistics (NBS), attributed the slide to CBN’s regulatory forbearance which allowed the banks to restructure their loan books, particularly in sectors vulnerable to the shocks ignited by the COVID-19 pandemic.

At the MPC, Emefiele had said: “The Committee, also, welcomed the improvement in the Non- Performing Loans (NPLs) ratio at 5.4 per cent in July 2021, compared with 5.7 per cent in June 2021. The Committee thus urged the bank to sustain current efforts to bring NPLs below the 5.0 per cent prudential benchmark.”

Meanwhile, analysis of the results of Union Bank of Nigeria Plc, Ecobank Transnational Incorporated (ETI) Nigeria Plc, Wema Bank Plc, FBN Holdings, Sterling Bank Plc and FCMB released to the Nigerian Exchange Limited (NGX) showed that, while some of the lenders have reduced their NPLs, others only recorded marginal increases. For instance, Union Bank recorded marginal increase in its NPLs ratio during the period, while Wema recorded significant drop in its NPL ratio. However, ETI Nigeria and FBN Holdings are the only two banks with NPL ratio above the regulatory threshold in first half (H1) of 2021.

As reported in the first six months of the year’s unaudited results, Ecobank Nigeria’s NPLs dropped to 17per cent from 19.9 per cent recorded in H1 2020, while FBN Holdings reported 7.2 per cent NPL/Gross Loans from 8.80 per cent recorded in H1 2020. FBN Holdings’ Group Managing Director, Urum Kalu Eke, had, while commenting on the bank’s H1 results, said the macro and socio-economic conditions remain challenging, given the COVID-19 pandemic and the low-interest rate environment.