Cash Crunch Induces High Loan Default Rate For Banks –Survey

The cash crunch experienced in the country in the wake of the Central Bank of Nigeria’s naira redesign policy induce massive loan default by bank customers, a recent survey has shown.

The survey conducted by Successory Nigeria Ltd which analysed responses of top bank staff revealed that loan approval peaked between January to March 2023 but customers were unable to repay.

“The non-availability of cash has resulted even in sharp increase in loan default and overdue on all fronts which invariably affected the earnings of our institutions. Above all, it has increased operating costs.

“I am happy we are gradually trying to put the bitter experience behind us but the scar from it is still hurting,” one of the respondents said.

The survey highlighted that the exercise exposed the greed of some Nigerians with penchant for profiting from citizens at every given opportunity.

The survey concludes,”The failure of the exercise showed gaps in political engineering and management. The currency exchange, national census and national elections all planned to happen within ninety days to the end of this Administration were just too many National activities to coordinate within this short period.

“Some respondents actually remarked that this policy was a deliberate punishment to make them poorer. We hope this research will guide future policies and economic decisions that will impact on the people to ensure that they do not further impact negatively on their livelihood or plunge them into poverty with adverse effects too on the economy.”

The CBN in October 2022, announced the introduction of a new N1,000, N500 and N200 notes by December 15 and the withdrawal of the old notes.

The CBN set January 31, 2023 as initial deadline before subsequent extension to February and December, 2023 after the Supreme Court ruled on the matter.

The bank withdrew over N2trn from the system leaving citizens and businesses to suffer a chronic cash crunch.

Poultry Association of Nigeria (PAN) said its members lost more than N50 billion worth of over 15 million crates of eggs due to the policy.

But banks are not left out as loan repayment was frustrated due to the policy.

About 78.6 per cent of respondents who spoke to Successory, an Abuja based consulting firm said customers did not make loan repayment when due.

But during the period of the naira crunch, financial institutions increased loan approvals and disbursements, according to 78.6 per cent of the respondents.

Another challenge that hit financial institutions was a rise in corporate running cost affected by inflation, according to 100 per cent of the respondents.