NDIC, CBN to create private bank over rising bank’s NPLs

By Odunewu Segun

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.

National Daily gathered that this was informed by rising volume of non-performing loans (NPL) in the Nigerian banking industry that is expected to rise to as high as N2.3 trillion when the banks begin to release their full year 2016 financial statement.

Banking sector credit, it was gathered from data released by the National Bureau of Statistics, by the end of 2016 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.

It was also revealed that 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.

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.