• Tuesday, June 25, 2024
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UPDATED: Nigerian banks recover N50.32m bad loans in 9 days with CBN’s new guideline

Nigeria’s big banks see 13% dip in interest expense as customers’ deposits hit 4-year high

Nigerian banks have within nine days of implementing the Global Standard Instruction (GSI) recovered N50.32 million bad loans from individual borrowers.

Kevin Amugo, Central Bank of Nigeria’s director of financial policy and regulation, disclosed this on Tuesday at the Chartered Institute of Bankers of Nigeria (CIBN) advocacy dialogue on ‘Non-Performing Loans (NPL) and GSI policy: Impact and insight for financial stability’ held in Lagos via Zoom.

The CBN had on July 13, 2020 issued a guideline on Global Standing Instruction (GSI) to enhance loan recovery across the banking sector, effective from August 1, 2020.

Industry summary of the GSI as disclosed by Amugo showed that banks so far triggered a total of 26,057 bad debts with a total value of N1.67 billion between August 1 and 9, 2020.

The CBN is currently working on the protocols for GSI for non-individuals and would soon release its operational guidelines.

Amugo also disclosed that the CBN has commenced the onboarding of mobile money operators unto the GSI platform.

The regulator said it has commenced onboarding of other financial institutions (OFIs) onto the Credit Risk Management System (CRMS) and thereafter to GSI platform.

Other financial institutions include microfinance banks, primary mortgage banks, development finance institutions and finance companies.

Adesola Adeduntan, managing director/CEO, First Bank of Nigeria, said for the banks to have recovered N50.3 million within a space of nine days is a positive development with high prospects.

Adeduntan, who was represented by Olusegun Alebiosu, chief risk officer at First Bank of Nigeria, said the number of recoveries was bound to increase in one year.

He said banks are supposed to support customers access cheap funds by way of guarantees but the problem has been trust.

“If the economy is to move ahead, trust environment must be improved,” Adeduntan said during a panel session.

At its meeting on February 18, 2020, the Bankers Committee approved the go-live on the GSI. The objectives of GSI include to facilitate an improved credit repayment culture, reduce non-performing loans (NPLs) in the banking industry, and watch-listing consistent loan defaulters.

The Nigerian banking sector non-performing loans ratio improved marginally to 6.4 percent in June 2020, from 6.6 percent in April 2020, though higher than the 5 percent regulatory threshold.

Godwin Emefiele, governor of the CBN, noted at the last Monetary Policy Committee (MPC) meeting that aggregate domestic credit (net) grew by 5.16 percent in June 2020 compared with 7.47 percent in May 2020. The committee commended the CBN Loan-to-Deposit Ratio (LDR) initiative to address the credit conundrum as the total gross credit increased by N3.33 trillion from N15.56 trillion at end-May 2019 to N18.90 trillion at end-June 2020. These credits were largely recorded in manufacturing, consumer credit, general commerce, information and communication, and agriculture, which are productive sectors of the economy.