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Bank Loans To Domestic Economy Fall To N15trn

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Deposit Money Banks (DMBs’) total credit to the Nigerian economy in 2018 fell by 3.9 per cent to N15.29 trillion from the N15.91 trillion recorded in 2017.

The industry’s non-performing loans (NPLs) however decreased by 25.15 per cent during the period, which represented a decline of N1.79 trillion in 2018 as against N2.36 trillion in 2017.

The sector was exposed to high credit risk as depicted by the high NPLs ratio of 11.70 per cent as at 31st December, 2018, though an improvement when compared with NPLs ratio of 14.84 per cent recorded as at 31st December, 2017.

The NPLs ratio of 11.70 per cent exceeded the maximum prudential threshold of five per cent for DMBs. In the same vein, the NPLs to Shareholders’ Fund Ratio improved from 69.21 per cent in 2017 to 57.50 per cent in 2018.

According to the annual report by the Nigerian Deposit Insurance Corporation (NDIC), the banking industry’s operating expenses reduced by 25 per cent – from N440 billion in 2017 to N330 billion in 2018, pushing the unaudited profit before tax (PBT) to a significant increase – from N150 billion in 2017 to N310 billion in 2018.

An analysis of sectoral allocation of credit by DMBs showed that the sub-sector of the economy with highest credit concentration in 2018 was the oil and gas. The level of DMBs exposure to the oil and gas sector stood at N4.66 trillion or 30.46 per cent of the industry total credit of N15.29 trillion as at 31st December, 2018.

The second in the level of exposure was the manufacturing sector with N2.25 trillion or 14.71 per cent of total credits. This was followed by the government with N1.34 trillion or 8.78 per cent of the total credits. While general commerce accounted for N1.14 trillion or 7.44 per cent of the total credit, the finance and insurance and general sectors received 6.49 per cent and six per cent of the total credit, respectively.

According to the report, licenses of 153 microfinance banks (MFBs) and six primary mortgage banks (PMBs) were revoked by the Central Bank of Nigeria (CBN) in 2018.

LEADERSHIP gathered that the withdrawal of their licenses was due to lack of or poor level of compliance with applicable laws, rules and regulations, default in financial reporting and funds management standards, risk assets review, board and senior management oversight, risk management practices, among other operational defects.

The report also showed that NDIC closed 138 MFBs and five PMBs, whose licences were revoked by the apex bank between 8th October and 3rd December, 2018.

In line with its mandate, the NDIC has made cumulative payments amounting to N116.258 billion to depositors, creditors and shareholders as claims settlement and administration in the 2018 financial cycle. The breakdown includes payments of insured and uninsured deposits of N108.641 billion, N2.973 billion and N70.53 million to depositors of the defunct DMBs, MFBs and PMBs, respectively. Another N1.272 billion payment was made to creditors and N3.30 billion to shareholders of banks in-liquidation.

The NDIC report also showed that 12,891,481 million new account numbers were added to the account base of the banking industry in 2018 alone.

According to the official figures, the total number of accounts in DMBs increased by 13.01 per cent from 99,114,035 as at 31st December, 2017 to 112,005,516 as at 31st December, 2018 through a recent drive to enhance financial inclusion as well as other social welfare schemes.

Nigeria’s financial authorities have a target of capturing at least 80 per cent inclusion of adult population by the year 2020.

Based on the report, the number of fully covered accounts at N500,000 in DMBs also increased from 96,760,687 in 2017 to 109,305,169 in 2018, representing an increase of 12.96 per cent. Therefore, the number of fully covered accounts that fell within the N500,000 guaranteed limit represented 97.59 per cent of all depositors in licenced DMBs.

Similarly, the Deposit Insurance Fund (DIF) grew by 14.66 per cent from N955.18 billion as at 31st December, 2017 to N1.095 trillion as at 31st December, 2018. The Special Insured Institutions Fund (SIIF) increased by 10.72 per cent from N99.24 billion as at 31st December 2017 to N109.88 billion as at 31st December, 2018, while Non-Interest Deposit Insurance Fund (NIDIF) increased by 43.47 per cent from N693.70 million as at 31st December, 2017 to N999.94 million as at 31st December, 2018.

 

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