The Nigeria Deposit Insurance Corporation (NDIC) revealed in its annual report and statement of accounts for 2017 that Nigerian banks Non-Performing Loans (NPLs) in 2017 was N2.36 trillion. This represents a 13.46 per cent decrease compared to N2.08 trillion in 2016.
According to the corporation, the rising NPLs led to a deterioration in banks’ asset quality in 2017.
The report stated that
“The banking industry was exposed to high credit risk as the asset quality, which is depicted by the NPLs to Total Loans Ratio, further deteriorated from 12.80% in 2016 to 14.84% in 2017.
“That compared unfavourably with the maximum prudential threshold of 5%. Furthermore, the NPLs to Shareholders’ Fund Ratio significantly increased from 43.84% in 2016 to 69.21% in 2017.”
It may not be erroneous to say banks’ challenges with NPLs had a negative impact on the economy, as the NDIC report shows that the industry’s total loans to the domestic economy stood at N15.91 trillion in 2017, which was a 2.33 per cent decline from the N16.29 trillion recorded in 2016.
Non-performing loan according to the report has increased from N35 billion in 2014 to N2.36 trillion in 2017. NPLs in 2014 stood at N35 billion and increased by 4.88 per cent to N65 billion in 2015. In 2016, NPLs stood at N2 trillion, a figure that represented a 12.80 per cent increase.
It was reported that a total of ₦731 billion worth of bank loans were recovered by the Asset Management Corporation of Nigeria (AMCON) in seven years, since its inception.
Bad loans bought by AMCON had risen to N6.6 trillion. This was after the Corporation bought banks’ bad loans worth N3.3 trillion and paid N1.7 trillion for the loans.
The Central Bank of Nigeria (CBN), had called on all stakeholders in the country’s financial space to unite against the rising level of Non-Performing Loans NPL in the system.
Director, Banking Supervision, CBN, Abdulhaziz Barawu speaking at an event on credit reporting in the financial system noted that Credit and liquidity work concurrently and have an economic meaningful reciprocal relationship.