A research analyst with Afrinvest, Mr. Abayomi Ajayi, has said that a viable risk management network by banks will help bring down the level of Non-Performing Loans in the banking industry.
Ajayi told The Point, in Lagos at the weekend, that with the current trend of rising NPLs, banks would further bridle their risk appetites, especially with the implementation of the International Financial Reporting System 9, which took effect from this year, and requires commercial lenders to be forward-looking in the provisioning.
He recalled that the non-performing loans of commercial lenders in the country maintained an upward trajectory in 2017, despite Nigeria’s exit from recession at the end of the first half of the year.
Giving a brief review of some notable banks in the 2017 financial year, he said full year financial statements of Stanbic IBTC, Ecobank Transnational, Access Bank, Zenith Bank and GTBank, showed that their average NPL ratio jumped by 4.58 per cent in 2016 to 7.91 per cent as they posted improved profit, except Access Bank, whose post-tax profit dipped for the first time in six years.
He said the International Monetary Fund had, earlier this year, urged the Central Bank of Nigeria to carry out asset quality review, in order to identify any potential capital need and forestall rising banking sector risks in the country.
“The IMF stressed the need for the CBN to ensure strict enforcement of prudential requirements, and a revamped resolution framework would help contain risks,”
he added.
The asset manager also observed that the rising loan losses in the banking industry was a pointer to the weakness of the sector, which had relied majorly on government and activities related to it, like oil and gas and construction for their lending, noting that the dip in global oil price was responsible for the bad loans as this impacted the ability of many borrowers to pay back their loans.