CBN Urges Banks To Reduce Non-Performing Loans

The Central Bank of Nigeria has urged banks to bring down the sector’s non-performing loans below five per cent, which is the prudential benchmark.

It noted that the current ratio of 6.3 per cent was above the prudential benchmark as of February.

Reports obtained from the CBN after its recent Monetary Policy Committee showed on Tuesday.

Part of the report read, “The MPC noted the performance of the financial soundness indicators of the Deposit Money Banks which showed a Capital Adequacy Ratio of 15.2 per cent, non-performing loans ratio of 6.3 per cent and liquidity ratio of 40.5 per cent, as at February 2020.

“On non-performing loans, the MPC noted that the ratio remained above the prudential benchmark of 5.0 per cent and urged the Bank to sustain its regulatory measures to bring it below the prudential benchmark.”

The non-performing loans in the banking sector rose by N333bn as of the end of the third quarter of 2020 to N1.5tn at the end of 2020.

These were according to statistics from the CBN and the National Bureau of Statistics.

The NBS’s latest report on the banking sector revealed that the total amount of non-performing loans in Nigerian banks stood at N1.17tn as of Q3 2020.

According to the CBN, despite the increased lending and rise in non-performing loans during the coronavirus pandemic, the banking system had remained stable.

Figures obtained from the CBN showed that the non-performing loans rose to 6.01 per cent of the total loans to the economy which stood at N25.02tn as of the end of 2020.

The CBN stated that there was, “a marginal increase in the non-performing loans ratio which rose to 6.01 per cent at end-December 2020 from 5.88 per cent at end-November 2020 and above the prudential maximum threshold of five per cent.”

While noting that this development was not unexpected under the prevailing circumstances, it emphasised the need to strengthen macro-prudential framework to bring non-performing loans below the prescribed benchmark.

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