17 Deposit Money Banks (DMBs) in the country have sought permission from the Central Bank of Nigeria (CBN) to restructure over 32,000 loans for individuals and businesses impacted by the coronavirus (COVID-19) pandemic. Deputy Governor, Financial Systems Stability Directorate at the apex bank, Mrs. Aishah Ahmad, disclosed this in her Monetary Policy Committee (MPC) personal statement prepared after the May 28 meeting of the committee. In the statement, which along with personal notes of other members of the committee was posted on the CBN’s website on Wednesday, Ahmad noted that although financial soundness indicators remain strong, the industry continues to be exposed to shocks induced by the coronavirus crisis. She said: “Despite the headwinds and rapid expansion of credit (gross credit increased by N3.0 trillion between end-May 2019 and end-April 2020) driven by the Loan to Deposit Ratio (LDR) policy, non-performing loans (NPLs) ratio stood at 6.6 per cent at end April 2020, compared with 11.0 per cent at end April 2019.”
She stated that its resilience notwithstanding, the industry remains exposed to shocks from spill-over effects of the pandemic on macroeconomic conditions, adding that: “This underscores the importance of regulatory measures to mitigate the effects of the crisis, such as granting forbearance to banks to temporarily restructure loans for businesses and households most affected by COVID-19 and the Global Standing Instruction policy to limit NPLs.” According to the CBN Deputy Governor, “As at end-May 2020, staff reports indicate that 17 banks submitted requests to restructure over 32,000 loans for individuals and businesses impacted by the pandemic, representing 32.94 per cent of total industry loan portfolio, with the manufacturing and general commerce sectors constituting the bulk of the restructured facilities.”
She, however, said that results from ongoing impact assessment of COVID- 19 effects on impairment by banks, show modest impact due to regulatory policy measures already implemented, adding that: “These, coupled with close monitoring by authorities and enhanced risk management practices by financial institutions, would help to mitigate the emerging risks and preserve financial system stability.” Similarly, in his personal note, another member of the committee, Deputy Governor, Corporate Services Directorate, CBN, Mr. Edward Adamu, stated that: “Though key banking system Financial Soundness Indicators (FSIs) – capital adequacy ratio, non-performing loans (NPLs) ratio, earnings, etc., have thus far been quite robust, the industry is not insulated from the adverse impacts of the global economic and financial weakening arising from COVID-19 and soft oil prices.” Specifically, he said: “The oil price shock continues to reverberate through the economy from the oil and gas sector.
The banking system, for example, is heavily exposed to the sector. In April 2020, credit to the oil and gas sector accounted for about 26.0 per cent of the industry’s total loans and advances, making the sector the single most important in terms of credit exposure of the banking system. “Related to this source of vulnerability is the foreign currency exposure of the industry which stood at approximately 41.0 per cent in April 2020. Low oil prices translate directly to low resources in the oil and gas sector and reduced foreign exchange inflow to the economy. Therefore, protecting the financial system remains a priority going forward,” he added. In the wake of the devastating impact of the COVID- 19 pandemic impact on the country’s economy, coupled with the slump in oil prices which has hampered the ability of borrowers to repay and service their debts, lenders have been announcing loan restructuring plans. Second Tier lender, FCMB Group, said in May it plans to restructure half of its loans after impairment charges surged 61 per cent to N3.7 billion in the first quarter