June 26, 2020

COVID-19: 17 banks seek CBN approval to restructure 32,000 loans

Godwin Emefiele, CBN Governor.

Godwin Emefiele, CBN Governor.

By Babajide Komolafe

In apparent reflection of the severe impact of the COVID-19 pandemic on the economy, 17 banks have written to the Central Bank of Nigeria (CBN) for permission to restructure 32,000 loans granted to individuals and businesses.

The said loans, amounting to several billions of Naira, are going bad.

Deputy Governor, Financial System Surveillance, CBN, Aisha Ahmed, disclosed this in her personal statement at the last Monetary Policy Committee (MPC) meeting.

Stressing the need for the apex bank to grant forbearance to banks to temporarily restructure loans of businesses and individuals as a way of mitigating the impact of the COVID-19 pandemic on the banking system, Ahmed said: “Even as the CBN monitors the potential risks to financial stability, it is gratifying that financial soundness indicators have remained strong, 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.

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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, while other prudential ratios remain robust.

“This resilience notwithstanding, the industry remains exposed to shocks from spillover effects of the pandemic on macroeconomic conditions. 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.

“As at end-May 2020, staff reports indicate that 17 banks submitted requests to restructure over 32 thousand 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. Results from ongoing impact assessment of Covid-19 effects on impairment by banks, indicate modest impact given regulatory policy measures already implemented. 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.”