×
  • Business - Banking & Finance
  • Updated: July 27, 2020

Nigerian Banks Cancel Customers' Loan Worth N1.9trn

Nigerian Banks Cancel Customers' Loan Worth N1.9trn

Over N1.9 trillion bad loans have been cancelled by commercials banks and merchant banks in Nigeria since the recession of 2015/2016, a new report by credit rating agency, Agusto & Co, disclosed. The report titled '2020 Banking Industry Report’ covered 24 banks operating in the largest economy in Africa.

According to the report, 19 commercial banks and five merchant banks accounted for an estimated 98 percent of the industry’s total assets as at December 31, 2019, which was the last period used for the survey of the bad loans cancelled by commercial banks and merchant banks.

[READ ALSO: Herbert Wigwe Addresses Access Bank's New Inorganic Growth Move In Kenya]

Why Banks Cancelled These Loans

It was learnt that the adoption of international financial reporting standards 9 (IFRS 9) accounting standard in 2019 in the banking industry and weak macroeconomic climate in Nigeria drove the number of bad loans cancelled, this was revealed by the annual reports released by the banks as at December 31, 2019.

“These banks collectively accounted for an estimated 98 percent of the industry’s total assets as at the same date and provide a good representation of the industry,” Agusto & Co said, adding that, "In the last four years, following the 2015/2016 recession, the Nigerian banking industry has written off a minimum of N1.9 trillion of impaired loans from its loan portfolio.

“This volume of write-offs has been driven by the weak macroeconomic climate and the introduction of the international financial reporting standards 9 (IFRS 9) accounting standard in 2019. In the wake of the unprecedented COVID-19 pandemic, the industry’s asset quality is further threatened given significant exposures to vulnerable sectors.” The agency said. It also said the restructuring of loan will “moderate the anticipated level of asset quality deterioration in the short term”.

[READ ALSO: Lafarge Revenue Crashes As Share Price Plummet In Stock Market]

CBN Restructures Over 35,000 Customers' Loans In 22 Banks

AllNews had previously reported that the Central Bank of Nigeria (CBN) restructured the loans of 35,640 customers in order to left the loan burden on them amidst the current economic downturn. The loans restructured would have been classified as bad debts if the CBN didn't restructure the loans.

The 35,640 customers' loan package was submitted by 22 banks seeking to restructure the loan and prevent bad debt considering the level of non-performing loans in the banking industry - although, NPLs has improved this year, hitting 6.4 percent last month June, from the 9.4 percent of the corresponding period of 2019; this is thanks to increased recoveries, write-offs and disposals.

The restructured loans are worth N7.8 trillion - note that the banking sector has a total N18.9 trillion credit. This was revealed by the CBN governor, Godwin Emefiele, who spoke at the Monetary Policy Committee (MPC) meeting yesterday, July 20, 2020, “If the CBN did not ask the banks to grant this forbearance to their customers, the loans will go bad immediately by our prudential ratios.”

Related Topics

Join our Telegram platform to get news update Join Now

0 Comment(s)

See this post in...

Notice

We have selected third parties to use cookies for technical purposes as specified in the Cookie Policy. Use the “Accept All” button to consent or “Customize” button to set your cookie tracking settings