Non-Performing Loan (NPL) in the banking industry rose by by 158 percent in the first half of 2016, to N1.7 trillion at the end of June 2016 from N649.63 billion at end-December 2015, according to the Central Bank of Nigeria (CBN).
The industry wide NPL ratio rose to 11.7 per cent from 5.3 per cent, thus exceeding the prudential limit of 5.0 per cent.
The CBN’s Financial Stability Report (FSR) showed that at the end of June 2016, loans to the oil and gas sector constituted 28.77 per cent of the gross loan portfolio of the banking system as credit to that sector grew to N4.511 trillion, compared with N3.31 trillion at end-December 2015.
The industry wide NPL ratio rose to 11.7 per cent from 5.3 per cent, thus exceeding the prudential limit of 5.0 per cent.
The CBN’s Financial Stability Report (FSR) showed that at the end of June 2016, loans to the oil and gas sector constituted 28.77 per cent of the gross loan portfolio of the banking system as credit to that sector grew to N4.511 trillion, compared with N3.31 trillion at end-December 2015.
Loans to State Governments rose to N1.38t trillion from N1.054 trillion at end-December 2015, as declining revenues continued to constrain payment of salary by some States, funding of key services and execution of developmental projects.
This was despite CBN’s N338 billion special intervention scheme designed to refinance States’ debts, as well as a debt restructuring programme introduced by the Debt Management Office (DMO), which enabled States restructure their commercial loans in the preceding period.
However, to prevent further financial crisis, a fresh facility of N90 billion with a 9 per cent interest rate was made available to the States.
The total exposure to the top 50 obligors stood at N5.23 trillion (33.4%) of total industry credit exposure of N15.68 trillion. Credit exposure to the dominant sectors as follows: 28.77 per cent to oil and gas sector; 12.95 per cent to manufacturing; 8.84 per cent to governments; and 8.69 per cent to general commerce.
According to the report, Credit risk is expected to trend higher into the second half of 2016 owing to increased loan impairments resulting from the depreciation of the Naira, inability of obligors to service foreign currency-denominated loans, as well as bank exposures to the oil and gas sector
The liquidity ratio for the industry decreased by 6.02 percentage points to 42.61 at end-June 2016, from 48.63 per cent at end-December 2015, but remained above the prudential minimum limit of 30 per cent by 12.61 percentage points. However, market liquidity decreased at the end of the first half of 2016 owing largely to the increase in Cash a Reserve Ratio CRR to 22.50 per cent from 20.00 per cent and Monetary Policy Rate MPR from 11.00 per cent to 12.00 per cent.
The baseline CAR for the banking industry, large, medium, and small banks stood at 14.74, 15.65, 11.99 and 3.16 per cent respectively. These levels reflected declines of 2.92, 2.83, 3.62 and 14.45 percentage points respectively compared with December 2015 positions.
The total exposure to the top 50 obligors stood at N5.23 trillion (33.4%) of total industry credit exposure of N15.68 trillion. Credit exposure to the dominant sectors as follows: 28.77 per cent to oil and gas sector; 12.95 per cent to manufacturing; 8.84 per cent to governments; and 8.69 per cent to general commerce.
According to the report, Credit risk is expected to trend higher into the second half of 2016 owing to increased loan impairments resulting from the depreciation of the Naira, inability of obligors to service foreign currency-denominated loans, as well as bank exposures to the oil and gas sector
The liquidity ratio for the industry decreased by 6.02 percentage points to 42.61 at end-June 2016, from 48.63 per cent at end-December 2015, but remained above the prudential minimum limit of 30 per cent by 12.61 percentage points. However, market liquidity decreased at the end of the first half of 2016 owing largely to the increase in Cash a Reserve Ratio CRR to 22.50 per cent from 20.00 per cent and Monetary Policy Rate MPR from 11.00 per cent to 12.00 per cent.
The baseline CAR for the banking industry, large, medium, and small banks stood at 14.74, 15.65, 11.99 and 3.16 per cent respectively. These levels reflected declines of 2.92, 2.83, 3.62 and 14.45 percentage points respectively compared with December 2015 positions.
