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Agusto: Banks wrote off N1.9trn impaired loans in 4 years

Naira weakens further to N475/$1 on parallel market

In the last four years, the Nigerian banking industry wrote off a minimum of N1.9 trillion of impaired loans from its loan portfolio due to the  2015/2016 recession, the Agusto & Co 2020 Banking Report has said. Highlights of the report, which were posted on Agusto & Co’s website, show that Nigeria’s weak macroeconomic climate was a major contributing factor to the loan write-offs.

 

Also, the 2019 introduction of IFRS 9 accounting standard played a major part.

 

According to the report, the coronavirus crisis is a major threat to the industry’s asset quality given significant exposures to vulnerable sectors. The report reads in part: “In the last four years, following the 2015/2016 recession, the Nigerian banking industry has written off a minimum of N1.9 trillion of impaired loans from its loan portfolio.

 

This volume of  write offs has been driven by the weak macroeconomic climate and the introduction of the IFRS 9 accounting standard in 2019. “In the wake of the unprecedented COVID-19 pandemic, the industry’s asset quality is further threatened, given significant exposures to vulnerable sectors.

 

The Central Bank of Nigeria (CBN) has granted palliatives to banks in form of permitted loan restructurings to certain sectors that have been severely affected by the pandemic and we expect this to moderate the anticipated level of asset quality deterioration in the short term.” It will be recalled that as part of its COVID-19 intervention measures, the CBN permitted DMBs to offer loan forbearance to some of their customers.

 

The apex bank explained that this will ensure that loans can be restructured for customers in sectors of the economy that have been particularly hit hard by the pandemic.

 

CBN Governor, Mr. Godwin Emefiele, told journalists at the post-Monetary Policy Committee (MPC) briefing last Monday that about 22 commercial banks have so far restructured N7.8 trillion worth of loans (or 41 per cent), out of a total of N19.9 trillion, for some 35,640 customers.

 

He noted that it would be preferable to restructure up to 65 per cent of loans instead of allowing such loans to go bad.

 

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