The organised private sector (OPS) have declared that the Central Bank of Nigeria (CBN)’s directive for banks to bring down non-performing loans (NPLs) below five per cent, which is the prudential benchmark, from the current ratio of 6.3 per cent, will be a tall order to achieve this year, considering the prevailing economic challenges on businesses.
While speaking on behalf of OPS, which is the umbrella body and leading voice of all chambers of commerce and business community in Nigeria, a former Chairman, Lagos Chamber of Commerce and Industry Small and Medium scales Enterprise Group (LCCI SMEG), Dr. Jon Tudy Kachukwu, said that many businesses, mostly micro, small and medium scale enterprises (MSMEs) were still facing challenges, following the #ENDSARS protests and COVID-19, as well as general business disruptions. According to CBN, the nonperforming loans in the banking sector rose by N333 billion as of the end of the third quarter of 2020 to N1.5 trillion at the end of that year.
The National Bureau of Statistics (NBS)’s report on the banking sector revealed that the total amount of nonperforming loans in Nigerian banks stood at N1.17 trillion as of Q3’20. Kachukwu explained that it was not a bad directive from the apex bank considering the increases in amount of NPLs and the need for prudence.
He, however, said the current business climate won’t allow some MSMEs operators redeem their loan payments following the aforementioned business disruptions. With these, the former LCCI SEMEG chairman said that there were high expectations that the NPLs would rise over business owners’ payment default. According to him, MSMEs are out of capital and are struggling to access credit from the apex bank’s N50 billion credit facility slated for SMEs mostly affected by the economic disruptions.
Reports obtained from CBN after its recent Monetary Policy Committee (MPC) showed that “on non-performing loans, the MPC noted that the ratio remained above the prudential benchmark of 5.0 per cent and urged the Bank to sustain its regulatory measures to bring it below the prudential benchmark.”