Banks’ NPL Up 0.3% to 4.5% as Consumer Lending Declines by 11.1%

Nume Ekeghe

A member of the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has revealed that the non-performing loans (NPLs) in the nation’s banking sector have seen a slight uptick, rising by 0.3 per cent to reach 4.5 per cent as of February 2024.

However, this figure remains below the regulatory benchmark of 5 per cent.

Director General of the Securities and Exchange Commission (SEC), who doubles as a member of the MPC, Lamido Abubakar Yuguda noted in his statement at the MPC meeting held in march.

Yuguda said: “The banking sector has remained safe and sound with the key indicators within the prudential benchmarks. The Capital Adequacy Ratio (CAR) was above the 10 per cent mark in February. Non-performing loans (NPLs) ratio at 4.5 percent was up marginally by 0.3 percentage point 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.”

On his part, the Deputy Governor, Financial System Stability Directorate Philip Ikeazor noted that consumer lending declined by 11.1 per cent.

He stated: “The banking sector has remained resilient as most financial soundness indicators were 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.

“Credit to individuals and households declined significantly by 11.1 percentage points, down from 11.82 per cent at end-January to 0.71 at end- February 2024. The decline in consumer credit is due to the tightening stance of the Bank to curb inflation.”

Deputy Governor, Corporate Services Directorate, Bala Bello noted that efforts to stabilise the exchange rate are yielding positive results, with the naira showing appreciation or relative stability and external reserves increasing.

This improvement, he stated, is credited to policy rate hikes by the Monetary Policy Committee and non-interest rate measures and expresses that the expectations are that inflationary pressures will ease over time, supported by sustained monetary policy rate hikes and measures to attract capital inflows.

He said: “Recent developments indicate that efforts by the monetary authority to stabilise the exchange rate, are yielding positive outcomes. The reported appreciation / relative stability in the naira exchange rate and accretion to the external reserves over the last month is a welcome development.

“The improved exchange rate position can be attributed to the policy rate hikes by the MPC and other “non-interest rate” measures, such as re-engineering the operational procedures for the Bureau de Change segment and addressing illegal / speculative tendencies in the market, among others.

“In view of the high pass-through effects of exchange rate appreciation, it is expected that inflationary pressures would moderate over the medium term. Sustained monetary policy rate hikes and other complementary measures attracting capital inflows are, therefore, important in that regard.

“I should emphasise that sustained resilience of the financial system is critical in the pursuit of disinflation. It is, therefore, comforting to note that as of February 2024, major financial soundness indicators (Capital adequacy, non- performing loans, and liquidity ratios) remained strong. Given the strength of the banking system, I expect adequate funding of critical sectors of the economy to preserve the positive output performance and mitigate the aggregate supply-demand imbalances,” he stated.