Menu

The Central Bank of Nigeria (CBN) released its Financial Stability Report for the second half of 2015 on Wednesday, showing that non-performing loans (NPLs) in the Nigerian banking system rose by 78.8 percent year-on-year.

The CBN said NPLs rose to N649.63 billion as of December 31, 2015 compared with N363.31 billion recorded at the end of December 2014.

“Although the NPL ratio remained within the prudential ceiling of 5.0 per cent, it trended closer to the upper limit. A few banks had NPL ratio above the regulatory maximum limit of 5.0 per cent; however this posed no significant risks to the industry,” the CBN said.

The CBN attributed the rise in NPLs to the fall in oil prices, which resulted in huge impairments in oil and gas loans in the second half of last year.

At the end of H2 2015, the CBN said loans to the oil and gas sector accounted for 25 percent of the gross loan portfolio of the Nigerian banking system. Furthermore, bank credit to the sector rose marginally by 2.8 percent to N3.31 trillion at the end of December 2015 compared with N3.22 trillion as of June 30, 2015.

“It is expected that credit risk will increase due to threats of further rise in NPLs in the oil and gas sector. The CBN will continue to require banks to strengthen their contingency plans and conduct regular stress tests to mitigate the impact of the crash in oil prices on their balance sheets,” the apex bank said.

The CBN also said it has directed banks to publish in national newspapers, on a quarterly basis, the list of bad debtors to deter delinquent borrowers.

According to the CBN, loans to state governments rose by 33.9 percent to N1.05 trillion at the end of December 2015 from N696.87 billion recorded in the first half of 2015. In the period under review, the CBN said it disbursed N338 billion to 27 states under a special intervention scheme to refinance states’ debts.

Relative to end of December 2014, the apex bank said Nigeria’s net domestic credit (NDC) rose 12.13 percent to N21.61 trillion in the second half of 2015 compared with N21.41 trillion recorded in the first half of 2015.

“The growth in NDC reflected a significant increase in net claims on the Federal Government and the modest growth in private sector credit,” the CBN said.

As a result of the increase in banks’ holdings of government securities, the CBN said net claims on the federal government increased by 151.56 percent to N2.89 trillion in the second half of last year, compared with an increase of 118.45 percent recorded in H1 2015.

However, credit to the private sector, relative to the end of December 2014, rose by 3.29 percent to N18.72 trillion as of December 31, 2015, compared with the annualized growth rate of 8.54 percent recorded in the first half of 2015.

“The growth in credit to the private sector, especially the core private sector, reflected the impact of various policies of the CBN that enhanced the lending capacity of banks and encouraged increased lending to the private sector vis-à-vis the government sector,” the CBN said.