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17 banks request to restructure 32,000 loans says CBN

.. NPLs rise marginally to 6.6% ...MPC members advocate special incentive for companies that retain staff

The Central Bank of Nigeria (CBN) on Wednesday disclosed that as at the end of May 2020, 17 banks submitted requests to restructure over 32 thousand loans for individuals and businesses impacted by the Covid-19 pandemic.

This according to the CBN staff reports represents 32.94 per cent of total industry loan portfolio, with the manufacturing and general commerce sectors constituting the bulk of the restructured facilities.

Aishah Ahmad, deputy governor, Financial Systems Stability Directorate, said this in her personal statement at the last Monetary Policy Committee (MPC) meeting released on Wednesday.

She said results from impact assessment of Covid-19 effects on impairment by banks; indicate modest impact given regulatory policy measures already implemented. These, coupled with close monitoring by authorities and enhanced risk management practices by financial institutions, would help to mitigate the emerging risks and preserve financial system stability.

Asogwa, Robert Chikwendu, MPC member, said threats to domestic bank stability remain minimal as at now, just as in the last MPC meeting.

CBN staff report showed a marginal increase in the non-performing loans ratio in April as compared to February 2020. Also, there were modest declines in key profitability indicators (ROE and ROA), but increase in industry size at May 2020 still depicts a robust banking system. Even though on average, the banks still have strong capital and liquidity positions despite the threat of COVID-19, it is important that greater supervisory scrutiny is applied to avoid any deterioration should the health crisis deepen any further.

He said if more firms become distressed despite governments support for revival and the default rates on loans increases, the credit market may be jolted significantly. An arsenal of macro prudential support policies is therefore necessary to maintain banking sector resilience as they embark on aggressive economic recovery lending.

In his personal statement, Shonubi Folashodun, CBN’s deputy governor and a member of the MPC noted that amidst the general lull in the business environment, the banking system continued to show enduring resilience. In terms of size, industry total asset and deposit base rose further at end-April 2020, maintaining the upward trend since the beginning of 2020.

Though industry liquidity ratio declined to 38.4 per cent, due mainly to the LDR policy, which continued to promote increased credit, the ratio remained above the regulatory threshold of 30.0 per cent. Industry capital adequacy ratio moderated to 14.9 per cent, as a result of increased risk weighted asset, which more than offset the marginal rise in qualifying capital, while the non-performing loan ratio rose marginally to 6.6 per cent. Returns on asset and investment were at levels that compare favourably with levels in similar jurisdictions.

A member of the MPC has advocated that special incentives be given to companies that do not lay off their employees as a result of Covid19.

Adenikinju, Adeola Festus, member of the MPC who said this in his personal statement also wants the CBN to give priority to the employment generation sectors and the Small and Medium Enterprises (SMEs) in the implementation of the relief programmes.

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