Banks operating in Nigeria have decided to reduce the number of loan grants available to their customers for the year 2016, as a result of high non-performance loans propelled by the economic challenges in the nation.
Chief Executive Officer (CEO), Eco bank Transnational Incorporated, Ade Ayeyemi declared that Eco bank expects flat revenue this year, as against an 8% decrease to $2.1billion in 2015, stating that the Pan-African Lender is expected to reduce the foreign currency portion of its loan ledger due to the present struggle for survival of all Africa economies.
This is preceded by the fall in global oil price and the lender`s fall in loan rate by 9% last year.
According to him, “Inflation rose to its highest in nearly four years to 12.8 per cent in March, adverse currency movements and regulatory requirements hit margins, while slower economic growth hurt revenue generation.’’
Reports reveal that there is a general rise in bad loan rate in the banking industry by 78.8%(N649.63BN) last year.
This shows a huge drop in the quality of loan portfolio of 22 banks as declared in their 2015 annual reports released, by 30%(N5.78 trillion); this is due to a great fall in oil price, weak output growth, reduced investor confidence, low propensity to save, fiscal imbalances at the government level and so on.
The lingering foreign exchange challenge in the country have forced foreign banks to cut credit lines to Nigerian banks.
Furthermore, eight banks over-shot the regulatory limit of 5% bad loan ratio to eight in 2015 as against three banks in 2014, demonstrating that the bad loan ratio for the industry in relation to total loans granted rose to 4.88% which is actually 1.2% lesser than the regulatory limit.
Nigeria`s economy has been weakened by the fall in oil price, which was its main stream of revenue and economy growth.
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