The ratio of non-performing loans (NPL) to total gross loans in Nigeria’s banking sector declined to more than a three-year low at 9.30 percent as at June 2019. This is on the back of the Central Bank of Nigeria’s policy that requires effective management of credit risk.
The ratio which is a measure of the health of the banking system dropped to its lowest point in the second quarter of 2019 since the 5.32 percent last reported in the fourth quarter of 2015, data released by the National Bureau of Statistics on Sunday show.
Analysis of the data revealed that the banks’ NPL ratio was down 2.43 percentage points from 11.73 percent in the second quarter of 2016 to 9.30 percent in the corresponding quarter of 2019
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The Central Bank in August 2019 set new limits for banks and other financial institutions on the NPL to reflect in their books.
“The NPL limit banks are required to manage their credit risk effectively. To this end, all banks are to ensure that the level of the NPLs in relation to gross loans does not exceed five per cent,” the apex bank said.
The apex bank’s regulation is contained in the Prudential Guidelines to Microfinance Banks, Deposit Money Banks, Mortgage Refinance Companies, Finance Companies, and Development Finance Companies,
The total non-performing loans in the banking sector stood at N1.44trillion at the end of the second quarter of 2019. Whereas the gross loans in the period under review was at N15.48 trillion, up 1.19 percent from the N14.29 trillion in the corresponding quarter of 2016.
