Nigerian Banks Loan Ratio Blows more than CBN – This is to officially inform the general public of the Nigerian Banks Loan Ratio that is more than CBN loan. From records, it has been confirmed that Nigerian Banks Loan grew to 6%. This shows that it is now more than CBN.

Nigerian Banks Loan Ratio Blows more than CBN

CBN Governor, Godwin Emefiele told the house that the non-performing loan ratios for Nigerian banks worsened in 2020, blowing past the regulatory limits of 5% to close at 6% at the end of December 2020.

One may ask, what is Non-performing Ratio

Non-Performing Ratios can be said to be the percentage of bank loans that are bad as against the total loans banks in Nigeria have issued represented in their balance sheet.

The CBN explained that bank NPLs rose to 6.01% at the end of the year 20% higher than the regulatory allowed 5% allowed by the apex bank.

“The Monetary Policy Committee (MPC), however, noted the marginal increase in the Non-Performing Loans (NPLs) ratio which rose to 6.01% at end-December 2020 from 5.88%at end-November 2020 and above the prudential maximum threshold of 5.0%. While noting that this development is not unexpected under the prevailing circumstances, it urged the Bank to strengthen its macro-prudential framework to bring NPLs below the prescribed benchmark,” CBN MPC

As of the third quarter of 2020, the non-performing loans in Nigeria was about N1.1 trillion with oil and gas loans representing N238 billion or 11.3% of the total.

What made the non-performing loan ratios of Nigerian Banks to increase?

The rise in banks’ non-performing loan ratios is mostly due to the weakening economy in 2020 triggered by the economic lockdown introduced to curb the spread of Covid-19.

• With the economy shut down for the most part of the year, businesses in the country recorded little to zero sales affecting their ability to service their loans as and when due.
• The CBN’s policy of persuading banks to lend more may have also increased the NPL ratio, as increased lending to the private sector in a year where the economy was battered also led to higher non-performing loans.
• Banking sector credits rose by as much as 19% in 2020 according to data from the National Bureau of Statistics as banks aggressively lent more in line with the CBN’s loan to deposit ration policy.
• The CBN also recognizes the inertia caused by its policy when it stated that “Aggregate domestic credit, also moved further up by 13.40% in December 2020, compared with 9.48% in the previous month. This was largely attributed to the Bank’s policy on Loan-to-Deposit Ratio (LDR), complemented by its interventions in various sectors of the economy.”

EFG also believes the bank NPL ratio will reduce in 2021 as they expect the impact of Covid-19 to dissipate during the year.