Commercial banks’ Non-Performing Loans hit N2.25trn

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..as Contract staff numbers increase by 64.56%

…Nigerians transact N340.15trn on ATM, others

By Kayode Tokede

Commercial banks’ Non-Performing Loans (NPL) hit N2.25 trillion in third quarter of 2018, a report by National Bureau of Statistics (NBS) has disclosed. The report also disclosed that Commercial banks’ gross loans in the period under review moved to N15.86 trillion from N15.95 trillion in fourth quarter of 2017

This implies that commercial banks’ NPL/Total Loans has increased to 14.16 per cent in third quarter of 2018 from 13.83 per cent reported by NBS in first quarter of 2018.

The bureau had reported NPL of about N1.9 trillion and N2.2 trillion in second quarter and first quarter of 2018 respectively.

According to the NBS Selected Banking Sector Data: Sectorial Breakdown of Credit, ePayment Channels and Staff Strength, NPL in the commercial banks was N2.36 trillion as at fourth quarter of 2017, translating to five per cent drop in commercial banks’ NPL.

The Monetary Policy Committee of Central Bank of Nigeria (CBN) was concerned with the rising level of NPL in the banking system, traced mainly to the oil sector.

A member of the committee, Mr. Dahiru Balami, had noted that the asset-based soundness indicators showed that the NPLs ratio had risen from 12.45per cent in June 2018 to a high of 14.70per cent higher than the maximum five per cent prudential requirement.

He noted that the high NPL ratio may not be unconnected with poor credit administration of the commercial banks as well as high interest rate in the economy.

Another member of the committee Mr. Obadan Idiah noted that NPLs have remained a threat to the stability of the financial system and the macro-economy. According to him, the oil and gas sector accounts for the highest proportion (44.67 percent) of non-performing loans.

“This was understandable during the recession and oil market crash when the fortunes of the oil sector dwindled. But under the current regime of high oil prices and improved oil production, the oil and gas sector obligors should be able to service their loans and consequently, reduce the stress of the financial sector,” he explained in a MPC meeting of September 2018.

The report by NBS disclosed that contract staff in the commercial banks reached 44,484 in the third quarter of 2018, a 64. 56 per cent year-on-year increase from 27,032.

Of the 102,821 staff strength in the banking sector, contract staff dominated 43.3 per cent working force in the banking sector.

According to NBS, contract staff as at the first quarter of 2018 was 32,013, thereafter, it increased to 43,955 in second quarter of 2018.

The report stated further that senior staff working with commercial banks dropped by 13.18 per cent to 17,729 as at third quarter of 2018.

Interestingly, junior staff in the banking sector dropped by 0.38 per cent to 40,395 in third quarter of 2018 from 40,549 reported by NBS in second quarter of 2018.

As at third quarter of 2018, the total number of banks’ staff increased by 0.95 per cent Quarter-on-Quarter from 101,861 in second quarter of 2018 to 102,821 in third quarter of 2018.

The report revelaed that a total volume of 5,294,871,285 transactions valued at N340.15trillion were recorded in Q3 2018 as data on Electronic Payment Channels in the Nigeria Banking Sector.

Automated Teller Machine (ATM) transactions dominated the volume of transactions while NIP dominated value in the third quarter report of NBS.

ATM recorded 220,270,371 volume of ATM transactions valued at N1.59 trillion recorded in third quarter of 2018 while Instant Payment (NIP) recorded 23,918,468 volumes of transactions valued at N19.96 trillion.

Points of Sales recorded 86,038,267 volumes of transactions valued at N650 billion while Electronic Funds Transfer (NEFT) recorded N3.58 trillion value of transactions and 7,713,518 volume of funds transfer in the period under review.

WEB according to NBS report recorded the lowest value of transactions at N69.07 billion and 13,965,044 volume of transactions. In terms of credit to private sector, the total value of credit allocated by the banks stood at N15.59trillon as at third quarter of 2018.

The Oil & Gas and Manufacturing sectors got credit allocation of N3.59trillion and N2.15trillion to record the highest credit allocation as at the period under review.

Balami had questioned commercial banks’ credit appetite lending to the Oil & gas sector.

In his words “In Nigeria, the sectors with highest credit concentration are also sectors with high impact on the NPL.

“The critical question to ask is what credit appetite do banks have for giving more credit to the gas and oil sector? “Ordinarily, the areas which more credit should flow to are sectors such as agriculture, manufacturing, transport and storage, service, mining and quarrying as well as real estate activities.

“It should be noted that eight sectors recorded increases in credit between August 2017 and August 2018, while 18 sectors recorded decreases in credit.

“The low CAR and rising level of NPLs increases caution by Nigerian banks in lending to the real sector which is supposed to be the prime driver of the economy.”

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