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Bankers Committee to address non performing loans in banks

by Business News Report

The Bankers Committee said it is working to address the problem of non performing loans in Nigerian banking system which rose to N649 billion in the industry last year.

Director, Banking Supervision Department, Central Bank of Nigeria (CBN), Mrs Tokunbo Martins disclosed this at a press briefing after the Bankers Committee meeting held in Lagos.

She spoke in company of the Managing Director/ Chief Executive Officer, GTBank Plc, Mr. Segun Agbaje, Managing Director/ Chief Executive, Fidelity Bank Plc, Mr. Nnamdi Nwankwo, Managing Director/ Chief Executive, Unity Bank Plc, Mrs Tola Somefun and the Acting Director, Corporate Communication Department, CBN, Mr. Isaac Okoroafor.

A CBN staff report had revealed a sharp increase in non performing loans, which rose  to N649 billion last year, and as a result, the ratio of non performing loans to total loans rose to 4.8 per cent, implying the industry may soon exceed the regulatory threshold of 5.0 per cent.

Martins said that while the problem was not unexpected given the downturn in the economy, the Bankers Committee is however not resting on its oars. She said that the Committee discussed measures to tackle the problem and one of the measures considered was debt factoring. She said, “We all know that we are in an economic downturn and things are being hard at the moment. So NPL going up is not unusual, it is normal

“If people are finding it difficult to pay their staff salary and they are not able to pay their loans, it is not unexpected.

“Therefore if corporates are not performing as they should do and they are not able to pay their loan, it is not something unusual. And the figures you quoted, which is about  5 percent, it is not out of this world. But then on the other hand, it is not like we are resting on our oars. We did discussed it. We spoke about debt factoring. It is not something that has been done yet. But there was a discussion around that.

“But the most important thing is that banks are conscious of it. They are preserving capital. They have enough capital as we speak to absorb these risks as they come. And they are not distributing much of their capital as they would have in the past in anticipation of the risks that might crystalise, knowing in their mind they need to have enough capital to absorb the risks as they happen. One of the reasons why we have insisted on large capital ratio is for a time like this. So the banks have adequate capital to withstand the shock we are experiencing today.

“But even beyond withstanding the shocks, it also important that we continue to support the real sector. So we believe that they have enough capital

“And the fact that we have issued guidelines that have said that in view of the risks we face right now, which is not our own making, the banks need to be prudent, they need to be proactive, therefore don’t distribute as you used to do before, retain more, and they are doing so. So when you put all that together, they can withstand the shock. And so a I want to emphasise that the industry still remains strong and still well positioned to carry out its core functions”.

Meanwhile the Bankers Committee has said that the challenge of sourcing for fuel importation by oil marketers is beyond banks, adding the banks are not involved on the discussion between the Nigeria National Petroleum Corporation (NNPC) and International Oil Companies, on arrangement to provide foreign exchange to independent oil markets for importation of fuel.

Responding to questions about the Bankers Committee involvement in the discussion, Mr. Isaac Okoroafor, said, “The issue of importation of fuel is the exclusive preserve of NNPC, I wonder what you want banks to do there, If they are sourcing for forex, off course they don’t have to approach the banks to do so. That question should be thrown at the Minister for Petroleum.”

According to the MD/CEO of GTBank, Mr. Segun Agbaje, the Bankers Committee is of the opinion that foreign exchange situation calls for adjustment on the part of everybody.

He said, “The reality on the ground is that we are coming from  $115 per barrel oil price to somewhere around N37 per barrel. We all have to make adjustment. Our habits have to change a bit because we have less money to spend. As corporates, you have to invest in import substitution and develop things locally. We all have to grind now, and make sure we allocate the scarce foreign exchange we have now, to make the best out of it.

“What we have in Nigeria today is a supply problem. And the way you deal with a supply problem is first we have to cut back on demand p, we have to develop import substitution so that at some point you are able to meet the type of demand that you have. I am not sure there is any magic we can perform as a country other than get your supply  to meet the type of demand that you have.”

Mr. Okoroafor however said that there have been noticeable improvement in allocation of foreign exchange to manufacturers.”

Meanwhile the CBN has appointed two firms as super agents to drive financial inclusion in the country. Director, Banking Supervision Department, Central Bank of Nigeria (CBN), Mrs Tokunbo Martins disclosed this at the end of the Bankers Committee meeting, the name of the super agents are Interswitch Financial Inclusion Services and Innovatives Limited. She said, “You will recall that sometimes past the CBN started agency banking. Now there are two new agents, called super agents, that are supposed to recruit other agents that are supposed to distribute financial services at cheaper prices. Hopefully this would carry banking services to the nooks and crannies of Nigeria at affordable prices.”





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