" /> Rising NPL: Banks cut loans, opt for fixed income in H1 2017 | Hallmarknews
Published On: Sun, Sep 10th, 2017

Rising NPL: Banks cut loans, opt for fixed income in H1 2017


Nigerian economy which has struggled to exit recession may be sitting on a keg of gun power as banks cut down credits to the private sector in the bid to push down soaring non-performing loans (NPLs).

Review of the 2017 half year financial results of commercial lenders in the country showed that the risk assets of seven systemically important banks, excluding Skye Bank, dipped by -2.11 per cent to N6.94 trillion against of N7.08 trillion in the same period last year.

Lenders shied away from extending credits to the private sectors and majority of them opted to put their money in fixed income securities. As a result the investment in fixed income securities of five of the “too big to fail” banks soared by 1665.76 per cent to N37.34 billion during the period under review from N2.11 billion in December last year.

But the huge N630 million loss (H1 2016: N1.53 billion) and N3.65 billion loss (H1 2016: N33.09 billion) FBN Holdings and Access Bank incurred in investment securities dragged the average revenue the seven systemically important banks considerably down by -87.87 per cent in the first six months of 2017.

“This is not a good picture of what we are trying to achieve, because without credit to the private sector, the growth will not be there. We discovered that more credit went to government, because it is crowding out the private sector. And that is not good for the economy,” Mr Ambrose Oruche, Director, Corporate Affairs, Manufacturers Association of Nigeria (MAN) told BusinessHallmark in a telephone chat.

He noted that high interest rate of almost 30 per cent and lull in business prompted private sector operators to abandon loans, adding that manufacturers are worst for it.

The International Monetary Fund (IMF) had earlier this month raised concerns over the rising delinquent loans in Nigerian Banking industry, which jumped to 11.73 per cent at the end year of 2016 and is said to have reached almost 14 per cent in June 2017, catalyzed by the present economic crunch. The regulatory benchmark for NPL is five per cent. This has spurred commercial lenders to cut down their risk assets.

GTBank, Nigeria’s most capitalized commercial lender made the largest slice of its loan portfolio in the first six month of the year, shearing it by-7.83 per cent to N1.31 trillion from N1.42 trillion in December 2016. It was followed by Zenith Bank and First Bank, which cut their credit to customers by -4.46 per cent and -4.10 per cent respectively during this period. FirstBank has set a single obligor limit of N30 million to address its NPL challenge.

“Banks don’t just lend anyhow; they must benchmark it against their liquid assets, reserves and capital or shareholders’funds. You cannot blame banks for cutting down their loan portfolios, because of the due to the economic challenge in the country they may want to withdraw and review their positions before they embark on massive lending against,” Mr. Emma Nwosu, former Managing Director, defunt ACB International Ltd posited.

He argued that commercial lender must have embarked on this credit cut, because of losing depositors’ funds to customers, whose businesses have been seriously hit by the recession, adding that if banks don’t take precautionary measures, it may boomerang and affect the entire economy.

However, the fiscal authority, spearheaded by the Minister for Finance, Mrs. Kemi Adeosun, has been clamouring for reduction of the country’s Monetary Policy Rate (MPR), which currently stands at 14 per cent, in order to encourage productivity. The Central Bank insisted that cutting of rates would worsen Nigeria’s inflation rate, which was 16.1 per cent in June. The apex bank has a 6-9 per cent inflation rate target for 2017. The divergence of views between the fiscal and monetary authorities has been of concern to analysts who believe would slow down the country’s recovery process.

“If banks are cutting down loans to customers, it is a picture of what is happening at the level of the customers. It shows people are still suffering the effect of recession. Loans are demand driven. If you don’t have turnover, you don’t take a loan, because it is high cost taking a bank loan,” explained Dr Boniface Chizea, Managing Consultant, BIC Consultancy Services Ltd.

He urged the government to take a second look at the cost of funds in the country, saying there is urgent need to review the monetary policy rate, because Nigerian manufacturers cannot be competitive with the present 14 per cent interest rate when their counterparts in other parts of the world borrow as low as 1 per cent.

Nigeria has been in recession since the first quarters of 2016 and the economy contrasted -0.52 per cent in Q1 2017, but the country exited recession in Q3. The IMF has forecast that Africa’s largest economy would grow 0.8 per cent this year.

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Recent posts

  • Time is ripe for rates cut, says Rewane as inflation slows further in Oct.

    FELIX OLOYEDE This is the appropriate time for the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) to cut benchmark monetary rates after inflation rate slows down for the ninth consecutive time in October, said Mr Bismarck Rewane, Managing Director, Financial Derivatives. The National Bureau of Statistics on Tuesday released Consumer Price […]

  • ELAN National Lease Conference Focuses on Revamping Nigerian Economy

    FELIX OLOYEDE In furtherance of its objective of promoting the business of leasing in Nigeria, Equipment Leasing Association of Nigeria (ELAN) has concluded plans to organise the 15th Annual National Lease Conference with focus on revamping the Nigerian economy. The conference which is the biggest gathering of stakeholders in the leasing industry is expected to […]

  • Nigeria-centric restaurant, Labule, opens new outlet in Lagos

    Labule, Nigeria-centric restaurant, operated by an indigenous company, Roots Foods Limited, offering real Nigerian local delicacies in a unique environment that combines the setting of a modern quick service restaurant with that of an African setting of a local ‘buka’, has opened a new outlet on Admiralty Road in Lekki Phase 1, Lagos. The brand […]

  • Nigerian banks shine in Ghana

    By JOHNMARK UKOKO Nigerian banks have been credited with “revolutionizing “the banking sector in Ghana, due to the many innovations they brought to Ghana’s banking sector. The Ghana Deputy Minister of Trade and Investment Hon. Carlos Kingsley Ahenkorah said in Lagos that the innovation and transformation of the Ghana’s banking sector is credited to the […]

  • Ajimobi moves to save Oyo APC from disintegration

    By OLUSESAN LAOYE The seeming crisis in Oyo APC has now forced the Governor of the state, Abiola Ajimobi, to begin consultations with stakeholders to convinced members on why they must come together as a body to face the 2019 general elections, Although the internal crisis is yet to break open as the aggrieved party […]

  • YolaDisCo sale stalled as no potential buyers emerge

    By ADEBAYO OBAJEMU Two years after the core investors of the Yola Electricity Distribution Company, YolaDisCo, declared a force majeure owing to their inability to operate under the reign of terror unleased by Boko Haram, the Federal Government is yet to find any investor interested in operating the utility company, it has been learnt. In […]

  • Company Analysis: Much Ado about Seplat

      By TESLIM SHITA-BEY The oil and gas sector has had a bumpy since the beginning of 2017 with local oil major, Seplat, seeing its financials whipped raw by prior year liabilities despite rising revenues over the nine months (9M). The company in the last two years has moved from being distinctively bad to singularly […]

  • How to start a photography business

    By ZUBAIR DANIE While photography could be accounted for as a full blown course in any offering institution of learning for professionalism, the field equally provides a platform for individuals whose passion it is to project images as a form of livelihood. The socio-cultural aspect of Nigerians that play host of events like: wedding, naming, […]

  • BOFE to celebrate unsung heroes in local communities

    OluwasolaJesuseitan, a brand and advertising expert, is an advocate of sustainable brand communications. He is also the founder, Business Owners Forum Enterprise (BOFE), a non-profit making organization, which seeks to build the capacity of business owners in and around Akute, Ogun State. He tells FELIX OLOYEDE in this interview of his organization is promoting business […]

  • Lager wars: Who wins?

    By JOHNMARK UKOKO Nigeria has many lager beer producing companies, some have been in existence for over 50 years while others are quite new in existence in the country. Some of these companies that have over the years churned out millions, if not billions of bottles of beer to Nigerian drinkers are: Nigeria Breweries Plc, […]

  • Nestle sparkles in Q3 results

    By OKEY ONYENWEAKU As the packaged Consumer goods (PCG) sector struggles to stay ahead of falling consumer demand, companies such as Nestle Nigeria plc are bucking the trend of businesses with shrinking bottom lines. Indeed the multi-product packaged goods producer has seen earnings rise to mind boggling with its pre-tax profit rising by a stunning […]

  • 2018 Budget proposals renew old anxieties

          FELIX OLOYEDE   Mixed reactions trailed the presentation of the 2018 federal government budget by President Muhammadu Buhari to the National Assembly (NASS) last week. Public policy analysts have expressed moods from the congenially positive to the outright incredulous. The staggering N8.6 trillion expenditure plan is one of the most audacious in […]

  • Anambra 2017: Obiano battles for life

    By Obinna Ezugwu The time has finally arrived. On Saturday the people of Anambra State will head to the polls to either renew the mandate of the incumbent state governor, Chief Willie Obiano who is running for a second term in office, or elect fresh hands from among other prominent contenders, including Mr. Oseloka Obaze […]

  • (Editorial) CBN’s BVN distraction and matters arising

    Nigeria’s fiscal and monetary authorities have a frustrating way of responding to the seizure of private assets; they typically gloat with glazed eyes over private citizen’s money ready to pounce on the cash like a pack of hyenas starved witless. The recent order by the Central Bank of Nigeria that customer accounts that are not […]

  • 12 Yoga tips for beginners

    The popularity of yoga has soared in the last decades, and it seems that every other friend and acquaintance of ours is already practicing it. But don’t let it fool you into thinking it is easy: yoga is quite challenging, especially for beginners. The good news is that there are some practical tips to make […]

  • Finally, embattled IGP, Ibrahim Idris, appears before Senate

    The Inspector General of Police, Ibrahim Idris, has arrived before the Senate ad hoc committee set up to investigate the allegations and counter-allegations between him and Senator Isa Misau. The IGP was accompanied by his lawyer, Alex Iziyon (SAN) and Special Assistant to the President on National Assembly Matters (Senate), Senator Ita Enang.   Details […]

Visit us on Google+