By Kayode Tokede
The Central Bank of Nigeria (CBN) on Tuesday disclosed that Non-Performing Loan (NPL) in the banking sector rose to 6.1 per cent in 2020 from 5.88 per cent at end-November 2020.
This is above the prudential maximum threshold of five per cent.
The CBN governor, Godwin Emefiele in his communiqué at the end of first Monetary Policy Committee (MPC) meeting for 2021, noted that this development is not unexpected under the prevailing circumstances, urging the Bank to strengthen its macroprudential framework to bring NPLs below the prescribed benchmark.
According to him, first MPC is coming on the backdrop of dampened optimism for improvement in global output recovery, associated with the resurgence of the COVID-19 pandemic and mild success with vaccinations across several countries
In his words, “In light of the ongoing synchronized efforts by the monetary and fiscal authorities to mitigate the impact of the COVID-19 pandemic, the Bank has committed substantial amount of money towards this objective.
“Indeed, total disbursements as at January 2021 amounted to N2 trillion. COVID-19 Targeted Credit Facility (TCF) meant for household and small businesses, wherein we have disbursed N192.64 billion to 426,016 beneficiaries.
“We have also disbursed N106.96 billion to 27,956 beneficiaries under the AgriBusiness Small and Medium Enterprises Investment Scheme (AGSMEIS), while in the Health Care Support Intervention Facility, we have disbursed N72.96 billion to 73 project that comprise 26 pharmaceutical projects and 47 Hospitals and Health Care Services Project in the country.
“To support the provision of employment opportunities for the Nigerian youth, the Central Bank of Nigeria also provided financial support through the Creative Industry Financing Initiative and Nigerian Youth Investment Fund amounting to N3.12 billion with 320 beneficiaries and N268 million with 395 beneficiaries, respectively.
“On enhancing power supply, the Bank has so far, provided N18.58 billion for the procurement of 347,853 electricity reading meters to Discos in support of the National Mass Metering Programme.”
He noted that the MPC members expressed concerns on the persisting uptick in inflationary pressure for the 16th consecutive month, with headline year-on-year inflation moving further to 15.75 per cent in December 2020 from 14.89 per cent in November 2020.
According to him, “This uptick was attributed to the increase in both the food and core components of inflation, which rose to 19.56 and 11.37 per cent in December 2020, respectively, from 18.30 and 11.01 per cent in November 2020.
“This continued upsurge in food inflation was attributed to the logistical bottlenecks, spurred by the increasing security challenges in many parts of the country, which disrupted food production and supply to the market.
“Other factors driving the core inflation, include the recent deregulation of the downstream sector of the oil industry, which led to hikes in the price of Premium Motor Spirit (PMS) and the upward adjustment in electricity tariff.
“The Committee, however, noted that as output rebounds, supported by the suites of stimulus packages by both the Federal Government and the Central Bank, inflationary pressure would likely begin to moderate in the near term.”
While expressing understanding of the public health dilemma of the recent spike in infections, MPC encouraged Government not to consider a wholesome lockdown of the economy so as not to reverse the current gains of the stimulus earlier provided in 2020.
“It also encouraged the Central Bank of Nigeria Management to intensify its efforts in the targeted credit facility to household, SMEs, the Health Sector, as well as Agric and manufacturing sectors which would not only boost consumer spending but result in manufacturing output thereby positively impacting the GDP. On this basis, the MPC agreed to hold all policy parameters constant,” he said.
On the external reserves position, he said the committee noted the increase in the level of external reserves, which stood at $36.23 billion as at 21st January, 2021 compared with $34.94 billion at the end of November 2020.
“This reflected improvements in crude oil prices, partial global economic recovery amid optimism over the discovery and distributions of COVID-19 vaccines by most developed economies,” he said.
On outlook, Emefiele said, “ Overall, the medium-term outlook for both the domestic and global economies continued to show improved prospects of recovery, supported by the recent moderate uptick in crude prices and increased optimism over the procurement and distribution of COVID-19 vaccines.
“Available data and forecasts for key macroeconomic variables for the Nigerian economy suggest further improvement in output growth in the first quarter of 2021.
“This would be supported by the coordinated and sustained interventions of the monetary and fiscal authorities, including the broad-based stimulus and liquidity injections. Inflationary pressure is also expected to commence moderation as the economy’s negative output gap closes.”
He stated that the committee commended the Bank for maintaining a sound regulatory surveillance over the banking system by ensuring a reasonably low level of NPLs, even with the aggressive credit expansion programme during this crisis period.
“Though, NPLs remained slightly above the prudential benchmark, members noted that the banking system remained stable, strong and resilient. Given the success recorded under the LDR policy, it thus urged the Bank to sustain its risk surveillance approach and ensure the continued soundness of the banking system,” he explained.