CBN Governor, Sanusi Lamido Sanusi
By Obinna Chima
The total value of Non Performing Loans (NPLs) in the Nigerian banking industry stood at N692 billion as at the end August this year, compared with the N1.11 trillion it was in December 2010, the Central Bank of Nigeria (CBN) said Monday.
Deputy Governor, Financial System Stability, CBN, Dr. Chiedu K. Moghalu, disclosed this in an address presented at a stakeholders’ forum organised by the Bank Directors Association of Nigeria (BDAN) in Lagos.
Moghalu emphasised that the significant reduction in the NPL recorded in the industry was as a result of improvement recorded in corporate governance, risk management as well as the impact of the Asset Management Corporation of Nigeria’s (AMCON) role in the entire exercise.
But the total value of NPL in the industry may reduce further as a recent report by Renaissance Capital had said that Zenon Petroleum and Gas Limited’s loans, worth about $1 billion, among other loans would be absorbed by the ‘bad bank’ this quarter.
According to Moghalu whose speech was titled: “Banking on Reform: Perspective on the Future Landscape of Banking in Nigeria,” the average industry NPL as a percentage of total credit currently stands at 9.37 per cent, which is below the maximum prudential threshold of 12.5 per cent.
The deputy governor whose speech was read by the Director, Financial Policy Regulation Department, CBN, Mr. Chris Chukwu said: “While the reforms may not yet have been fully bedded down, they have nevertheless already changed the shape, structure and character of the banking system as well as redefined both the competitive landscape in which banks operate and the dynamics of risk and return that shape their businesses.
A new banking culture is taking root in the industry with emphasis on sound corporate governance, effective risk management, transparency and disclosure, as well as sound business ethics.
“The impunity, corporate governance abuses, rent-seeking, reckless lending and underwriting practices that characterized banking business prior to the reforms are no longer the norm. There is also enhanced regulatory and supervisory oversight by the relevant authorities to avoid the pitfalls of the past.”
He said that the bank directors, as the umbrella body of non-executive directors of banks in Nigeria, BDAN had an important role to play through the continuous improvement of the knowledge and competence of Bank Directors in the country.
“Bank directors, being key decision makers in the industry, need to be abreast of how these changes will shape the future of banking in Nigeria,” he said
He reiterated that the new banking model introduced by the CBN would bring about a banking system where banks are involved in core or narrow banking activities, devoid of the unbridled risky behaviour that greatly contributed to the recent banking crisis.
In his speech, the President, BDAN, Mr. Ferdinand Alabraba, disclosed that the current governing council of BDAN had approved a framework for greater engagement of its members with the CBN and other regulators.