Deputy governor of Financial System Stability of the Central Bank of Nigeria (CBN), Philip Ikeazor, has said that the rise in non-performing loans in the Nigerian banking industry is alarming.
Personal statements of the Monetary Policy Committee Members, released on CBN’s website on Tuesday, show that NPL in the industry has risen by 0.3 per cent to 4.5 per cent, a situation Ikeazor said gives backing to the recapitalization move by the apex bank.
In his statement at the last MPC meeting held in March, Ikeazor raised the concern by stating that the banking sector has remained resilient, with most financial soundness indicators within their regulatory thresholds.
“Despite this, the moderate increase in NPLs and the slight decline in CAR reinforces the importance of recapitalizing the banking system.
“The imbalance between the exposure of the oil and manufacturing sectors and their poor contribution to growth is problematic, even as non-performing loans (NPLs) continue to rise.
“Considering their vulnerability to rate hikes, consecutive aggressive tightening will further depress the economy.
“The pressure point is already manifesting as indicated in the projected contraction of PMI in the industrial sector by 7.1 index points occasioned by rising input cost and low-capacity utilization,” he pointed out.
Another member of the Monetary Policy Committee(MPC), former director general of the Securities and Exchange Commission (SEC), Lamido Abubakar Yuguda, noted the rise in NPL. However, he said it is still within the prudential threshold of five per cent.
To him, “the banking sector has remained safe and sound with the key indicators within the prudential benchmarks.
“The CAR was above the 10 per cent mark in February. The non-performing loans (NPLs) ratio at 4.5 per cent was up marginally by 0.3 percentage points compared to January 2024 but remained below the prudential benchmark of 5.0 per cent.
“The Industry Liquidity Ratio (LR) was 42.7 per cent, exceeding the minimum regulatory requirement of 30.0 per cent and was higher than the 42.1 per cent recorded in the previous month.”
Recall that on April 2, the apex bank raised the minimum capital requirement for all banks in Nigeria.
Recapitalization: Nigerian Banks’ Non-performing Loan alarming – CBN