The total earnings of Nigeria’s banking sector declined by 11 percent to N27 trillion as at September 2020 as lending reduced due to the effects of Covid-19 pandemic.
Galadima Gana, director, insurance and surveillance department, Nigeria Deposit Insurance Corporation (NDIC), disclosed this at the ongoing 2020 workshop for business editors and financial correspondents organised by NDIC in Kaduna State.
However, he said the banking industry’s total gross rose by 8 percent to N48 trillion as at September 2020, while total credit grew to N19 trillion. Total deposit increased by N3 trillion between the first and third quarters of this year.
The industry’s Non-Performing Loans (NPLs) stood at 6 percent during the period, which is higher than 5 percent regulatory threshold.
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Gana said the banking sector is highly capitalised and liquid as the industry’s Capital Adequacy Ratio (CAR) stood at 15 percent, which is higher than 10 percent threshold for banks with national licence and 15 percent for banks with an international licence.
Liquidity ratio of the banking sector stood at 36 percent as at September 2020 and this is above 30 percent regulatory threshold.
Gana noted that the sector is yet to reach the 65 percent Loan to Deposit Ratio (LDR) as the industry average is 60 percent.
In June 2019, the Central Bank announced a new policy measure, which required Deposit Money Banks (DMBs) to maintain a minimum 60 percent Loan to Deposit Ratio (LDR). The objective was to grow the economy through making credit available to the real sector.
At the end of the last quarter of that year, the Nigerian banking sector recorded the most credit growth to the real sector in almost five years, hitting N17.1 trillion in the fourth quarter of 2019.
To further spur growth in the economy, CBN in October 2019 raised the LDR of banks to 65 percent, after the September 30 deadline given to the banks to meet its earlier 60 percent directive.
Gana said the Basel Committee on Banking Supervision (BCBS) has deferred the implementation of Basel III until 2023 as part of response measures to the impact of Covid-19 pandemic.
Speaking on a global review of Covid-related financial stability developments, policy measures are taken and assessment of their effectiveness, S. A. Oluyemi, director, research policy and international relations department, NDIC, said part of measures by NDIC to ameliorate the impact of Covid-19 was through the communication of policy measures and supervisory approach as well as cross-border coordination.
