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Nigerian banks’ non-performing loans drop significantly by 41% in 2019

The Nigerian banking industry witnessed a significant 41% decline in non-performing loans (NPLs) last year, the NBS has disclosed.

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CBN health intervention fund gets new interest rate by March 2012, Nigerian banks’ non-performing loans drop significantly by 41% in 2019, External reserves decline by over 8% in 3 months, Nigeria’s external reserves increase by $1.36 billion in 13 days

The Nigerian banking industry witnessed a significant 41% decline in non-performing loans (NPLs) last year, the National Bureau of Statistics (NBS) has disclosed.

The details

According to the NBS’s Selected Banking Sector Data for Q4 2019, which was released recently, banks’ NPLs dropped to N1.05 trillion in 2019, down from 1.79 trillion which was recorded during the preceding year.

The decline in NPLs is despite the fact that banks provided more credit facilities to the private sector in 2019, the NBS report noted. In specific terms, bank loans to companies in 2019 stood at N17.19 trillion, indicating a 4% increase when compared to total loan of N15.13 trillion that was disbursed to the private sector in 2018. Parts of the NBS report said:

”In terms of credit to private sector, the total value of credit allocated by the bank stood at N17.19 trillion as at Q4’19. Oil & Gas and Manufacturing sectors got credit allocation of N3.42 trillion and N2.62 trillion respectively, to record the highest credit allocation as at the period under review.”

[READ MORE: Nigerian banks face gloomy future over low oil prices, coronavirus)

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What this means

The decline in banks’ NPL ratio is due to two possible factors: increase in loan recoveries and loan write-offs. This is according to Chudi Achara, a Management Associate at First Bank of Nigeria Limited, who spoke to Nairametrics.

What to ask before taking loans, bad loan

READ MORE: OPS writes Buhari, demands tax holidays amid COVID-19 crisis

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He further explained that another factor that must have helped banks to reduce NPL ratio is the decision to diversify their loan portfolios into other viable sectors such as manufacturing and export. According to him, banks’ decision to diversify followed the oil price crisis of 2014-2016, which resulted in an unprecedented increase in banks’ NPLs due to the inability of oil companies to pay back loans. He said:

Many DMBs learnt from the crude oil price crisis of 2014-2016. During the oil boom, financing Oil and Gas was seen as more profitable. Therefore, banks put a huge percentage of their loan portfolios in that sector. Recently, banks have learnt to diversify into other sectors such as manufacturing and export. Focusing on financing short- term trade transactions rather than long term transactions has helped.

“More so, CBN’s recent focus on financing the real sector by increasing LDR to 65%, has seen banks lend more in recent times. This has increased the gross loans, with reference to the last MPC communique. And as you may know, the higher the increase in gross loans (as compared to Increase in NPL) will also reduce the NPL ratio.”

Will the reduction in NPLs determine banks’ decision to lend in 2020?

Achara stated that he does not believe that the reduction in the NPL ratio will affect banks decision to lend more really. This is because the decision to create risk assets is generally a business decision. In other words, such decisions are entirely dependent on the business strategy each bank wants to adopt. Different banks have their different risk appetites, he said. He, however, noted that Nigerian banks have a major role to play in ensuring that the economy recovers from the negative impacts of COVID-19.

[READ ALSO: Nigerian banks broadly positive after Naira devaluation)

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On the other hand, financial expert and Nairametrics’ economic commentator, Kalu Aja, believes that Nigerian banks’ loan forecast is negative going forward. He said:

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The forecasts going forward look negative with oil prices below $30. The Federation has failed to diversify forex earnings… Import substitution via border closure has been uncoordinated and non-eeffective.”

You may download the NBS report by clicking here.

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs. He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor. Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan. If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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Energy

FG set to create at least 5 million jobs for youths in the power sector – Minister of Power 

FG is set to create at least 5 million jobs for the youths, through its 5 million solar power initiative and other projects.  

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Consortium of Western investors to inject upwards of $5 billion in Nigeria's renewable energy sector, Power: Nigeria's deal with Siemens - the birth of a new era?

The Minister of Power has disclosed that the Federal Government of Nigeria is set to create at least 5 million jobs for the youths, through its 5 million solar power initiative and other projects.  

This was disclosed by Engr. Sale Mamman, The Minister of Power, during a stakeholder meeting in Jalingo, the Taraba state capital, where he addressed youths on the need to foster peace and harmony. 

Mamman, stated that in line with the demands of the youths, the Federal Government is set to create massive job opportunities for Nigerian youths in the power sector through its 5 million solar power initiative. 

This initiative includes the five million Solar Home System (SHS) project, the Mass Metering Scheme, among others. 

The minister lauded the youths for making their voices heard on developmental issues, He urged the youths to shun violent protest while giving the President a chance to implement their demands and other ongoing robust projects on youth empowerment. 

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What they are saying 

Speaking on the initiative to immerse 5 million Nigerian youths into the power sector, the minister said: 

“Plans are ongoing to kick start this and it is being designed to ensure that majority of the firms and the installers are Nigerian youths. This is also part of the commitment of President Muhammadu Buhari’s focus on lifting 100 million people out of poverty within 10 years. 

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“From the briefings I have received so far, the youths are taking up opportunities in this aspect as well as in renewable energy. This is another way the government will be empowering young Nigerians as the local assembly; installation and the maintenance of these meters are largely handled by our industrious youths.” 

“The minister urged the youths to vigilant and resist and attempt by some people to use them to incite violence for their sinister motive, noting that the Federal Government was tailoring more programmes for the youths through the Siemens Presidential Power Initiative and in building capacity on renewable energy.” 

“There is the assurance of Mr. President that Nigerians will be beneficiaries of the Siemens project which will turn around the power supply situation of Nigeria. When this happens, industries will be revived and SMEs driven by youths will thrive more. 

What you should know 

  • The initiative is expected to commence with a target for one-million-meter installation at least by December.  
  • The implementing agencies of the initiative are the Rural Electrification Agency and the Niger Delta Power Holding Company. 
  • However, the Central Bank of Nigeria is supporting local firms and Meter Asset Providers on financing the initiative. 
  • The National Power Training Institute of Nigeria (NAPTIN) is expected to play an active role in order to ensure that more youths become solar power installers and dealers to create a whole new trend of skills for self-empowerment. 

Why this matters 

The 5 million Solar project initiative will be implemented through the Economic Sustainability Plan steered by Vice President Yemi Osinbajo, and it is expected to create opportunities for manufacturers of solar panels, installers, revenue collection agents and technicians. 

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This initiative is expected to reduce the level of unemployment in Nigeria, and cater to demands for better opportunities by the youths, through self-employment. 

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ENDSARS

#EndSARS: Lagos State needs N1 trillion to rebuild losses – Gbajabiamila

Gbajabiamila has said that the Lagos State Governor told him that the state would need N1 trillion for the reconstruction of destroyed assets.

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Closing of Nigerian-owned shops in Ghana must be dealt with decisively - Femi Gbajabiamila, Lagos State needs N1 trillion for reconstruction - Femi Gbajabiamila

The Speaker of the House of Representatives, Femi Gbajabiamila has disclosed that Lagos State will need about N1 trillion for the reconstruction and repair of the properties and infrastructure that was vandalized and destroyed by hoodlums.

Gbajabiamila disclosed this while responding to questions from State House Correspondents after the assessment visitation of some of the properties that were destroyed during the protest.

What you should know

The #EndSARS protest which started as a peaceful demonstration by thousands of youths, degenerated into chaos after the protests were hijacked by hoodlums. The distasteful actions of hoodlums and arsonists have seen properties worth billions of naira vandalized, destroyed and razed down.

One of the consequences of these events was reported by Nairametrics as the Lagos State Government revealed that 27 of the burnt Bus Rapid Transit (BRT) vehicles in the Oyingbo and Ojodu Berger areas of the state cost $200,000 each, while 57 of them cost $100,000 each, which gives a total of N3.9 billion.

(READ MORE: Lagos to support owners of looted, vandalised stores)

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What they are saying

According to information gathered by The Punch, the Speaker said, “The House of Representatives will do all it can to compensate all those who suffered brutality, including policemen that lost their lives in the process.

“However, we want to know what exactly happened at the Lekki Toll Gate. The judicial panel must reveal this. However, I want to encourage Nigerians to allow peace to reign.

“I learnt from the governor of Lagos State that it will take N1trn to rebuild what had been lost and asked him what’s the budget size of the state, he said about N1trn. You can see we are moving backwards.

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“Hence, we must consider the consequences of our actions before embarking on any venture. I, therefore, appeal to the youth to allow peace to reign henceforth. I still believe in the unity of Nigeria.

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ENDSARS

#EndSARS: NBC fines AIT, Channels and Arise TV over use of “unverifiable” footages

The NBC has sanctioned three major Nigerian television stations over their reportage of recent unrest across the country.

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NBC slams N5 million fine on Nigeria Info over Mailafia's inciting comments

The National Broadcasting Commission, NBC, has fined Nigerian media houses including AIT, Channels TV and Arise News, claiming they used unverifiable video footages from social media to cover the #EndSARS protests.

This was disclosed in a report by AIT on Monday afternoon. According to media reports, the regulators imposed various fines on Arise TV, African Independent Television (AIT) and Channels Television between N2million and N3million.

“The National Broadcasting Commission has sanctioned Africa Independent Television, AIT, Arise TV and Channels for what it calls, a gross violation of the broadcast code, top of which is the use of unverifiable online video footages on the social media,” AIT said.

The Acting Director-General of the commission, Armstrong Idachaba, warned that further sanctions will be harsher and announced that the owners of AIT, DAAR Communications would be fined separately for alleged reports of a fire incident at the National Christian Centre.

The sanction according to Idachaba, will be a fine of not less than N2 million.

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The NBC had warned last week that broadcasters must “perform the role of a peace agent by adhering to the principle of responsibility, accuracy and neutrality” in reporting the protests.

More details later..

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