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Banks Write-Off N1.9tTrillion Bad Debts in 4 Years- Report

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Agusto & Co, a foremost rating institution in Nigeria, has disclosed that a minimum of N1.9 trillion impaired loans has been written off by commercial and merchant banks operating in Nigeria from their loan portfolio in the last four years.

Banks Write-Off N1.9tTrillion Bad Debts in 4 Years- Report

Agusto & Co in a report showed that the banks restructured N7.8 trillion loans within the period following the directive by the Central Bank of Nigeria (CBN) in March that permitted banks to restructure loans to businesses that have been severely impacted by the Coronavirus (COVID-19) pandemic.

The firm stated in its “2020 Banking Industry Report”, that the volume of write-offs have been driven by the weak macroeconomic climate and the introduction of the International Financial Reporting Standard (IFRS) 9 accounting standard in 2019.

According to the report, the industry’s asset quality is further threatened given the significant exposures to vulnerable sectors, but, it however, affirmed that the level of asset quality deterioration would be moderated by the CBN’s permitted loan restructuring to certain sectors of the economy.

 It stated: “While the forbearance to restructure some loans is expected to keep the industry’s impaired loan ratio, which stood at 7.6 percent as at 31 December 2019, at bay in the short term, Agusto & Co. is concerned about the performance of these affected loans, given that the coronavirus pandemic is yet to be curtailed and a second wave may be looming.

A further slowdown in economic activities and a total lockdown may worsen an already bad situation. “While we acknowledge a likely extension of the forbearance period in the event that the pandemic lingers, we expect a rise in the impaired loan ratio of the banking industry in the medium term.

“Our expectations are also driven by the regulatory-induced growth in the loan book driven by the minimum loan-to-deposit ratio (LDR) policy, with sanctions on banks for non-compliance through additional Cash Reserve Ratio (CRR) debits.

“We believe that banks should not be forced to lend as this may encourage weaker risk management practices. Furthermore, the foreign currency component of these restructured loans, largely in the oil and gas and power sectors bloat the exposures in the likely event of a further devaluation of the domestic currency.”

Agusto & Co further stated that approximately 23 per cent of the industry’s gross loans and advances was classified in the stage two category as at 31 December 2019, saying that it threatens the industry’s capital base and profitability.

“Agusto & Co. believes that the volume of stage two loans is a threat to the industry’s asset quality and future profitability. Stage two loans, primarily, comprise exposures with an increase in the associated credit risk compared to when the loan was disbursed. The COVID-19 pandemic with its impact on businesses has elicited an increase in the volume of stage two loans.

 “The COVID-19 pandemic is a further threat to capital. While most operators have a core capital base that very well exceeds the regulatory minimum, the banking industry will need to recapitalise in the medium term in view of proposed new minimum capital requirements, though yet to be disclosed by the apex bank,” it said.

 


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E-Financial

Lagos State Appoints MoneyMaster as Payment Partner for “Ounje Eko” Programme

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“Ounje Eko”, the food price discount initiative of the Lagos State Government, has appointed leading payment service bank, MoneyMaster Payment Service Bank Limited (MMPSB), as its collaborator in the bid to ensure ease of payments at the market.

MoneyMaster is one of the Central Bank of Nigeria-licensed Payment Service Banks (PSBs) to promote financial inclusion across Nigeria.

Under the partnership, MMPSB will apply its cutting-edge payment solution to engender easy payment and reconciliation in order to make   the experiences of Lagosians who will be getting their food supplies from the markets pleasurable. Its payment solution is also all-encompassing and ensures real time value to payment destinations.

The mobile bank was appointed as the collection and payment partner for “Ounje Eko” Food Markets programme which is a government initiative serving the five divisions of Lagos State. Consequent on this, MoneyMaster Payment Service Bank will collect payments in 57 LCDAs in the state.

The partnership gives credence to the quality of payment solutions that MoneyMaster is reputed for in its services to its growing business clientele in private and public sectors.

 


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E-Financial

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

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Central Bank of Nigeria (CBN), is investigating irregular foreign exchange transactions and forward contracts valued at approximately $2.4 billion.

CBN, EFCC Probe Banks, Firms over Alleged Forex Racketeering

The  inquiry follows an extensive audit by Deloitte, which scrutinized $7 billion in dollar debts accumulated under the bank’s previous leadership.

In the aftermath of the 294th Monetary Policy Committee meeting in Abuja, Yemi Cardoso, governor of CBN,  disclosed to journalists that the investigation, supported by the Economic and Financial Crimes Commission, among other security bodies, aims to clarify the legitimacy of these FX allocations identified as problematic by the audit.

“It was determined that a number of these transactions did not qualify…they were outright illegal. The law enforcement agencies are now looking into those transactions that as far as we are concerned, are not valid to be paid,” Cardoso detailed, emphasizing the unlawful nature of these forex deals.

The crux of the investigation lies in the audit findings that a significant portion of the scrutinized transactions lacked proper documentation and, in many instances, were deemed outright illegal.

However, the unfolding investigation has raised concerns within the organized private sector, with some entities contemplating legal action against commercial banks for unresolved forex bids.

Despite these tensions, Governor Cardoso reassures that the foreign exchange market remains open and transparent, inviting stakeholders to address their forex needs through the official channels.

Furthermore, Cardoso clarified the distribution of fertilizers to farmers as a one-off measure and not indicative of a shift back to direct interventions by the CBN, underscoring a commitment to strategic, regulatory governance rather than direct market involvement.

 

 

 

 

 

 

 

 


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E-Financial

CBN Urges Banks to Expedite Action on Recapitalisation

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Central Bank of Nigeria (CBN) has directed deposit money banks in the country to expedite action to increase their capital base from the current ₦25bn.

CBN Urges Banks to Expedite Action on Recapitalisation

Olayemi Cardoso, governor of CBN

Olayemi Cardoso, governor of CBN, stated this during the apex bank’s 294th meeting of the Monetary Policy Committee (MPC) on Tuesday in Abuja, when the MPC hiked the interest rate by 22.75% to 24.75%.

The apex bank chief said the MPC examined developments in the banking sector and expressed satisfaction that the industry remained stable. The committee, however, said to guard against risk, commercial banks in the country should accelerate their recapitalisation efforts.

Cardoso said, “The MPC also reviewed developments in the banking system and noted that the industry remains safe, sound, and stable. The committee thus called on the bank to sustain its surveillance and ensure compliance of banks with existing regulatory and macro-potential guidelines.

“The MPC also enjoined the banks to expedite actions on the recapitalisation of banks to strengthen the system against potential risks in an increasingly globalised world.”

 

 

 

 


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