The level of Non-Performing Loans (NPLs) assets in the Nigeria banking sector increased by 15.6 per cent in 2017, our correspondent reports.
Mr Collins Azikem, Head, Legal Services, M &A Capital Ltd., made the assertion on Wednesday at the GTI Group Finance and Investment Dialogue in Lagos.
Speaking on the topic: “Investor Protection, Bad Loans and AMCON Intervention,’’ Azikem said that the increment was a big concern and loss to the banking sector.
He said that NPLs were bad loans, usually money borrowed upon which the debtor had not made the scheduled payments.
According to him, the effects of the NPLs on banks are that it grossly weakens their capital adequacy ratios and has also resulted to the liquidation and untimely collapse of most banks in Nigeria.
“The huge provisions for bad loans are making a number of banks to have little or nothing left in terms of earnings.
“The International Monetary Fund (IMF) in its reports on Nigeria in March 2018 indicated that NPLs of the banking sector have risen to 15.6 per cent as at Oct. 2017.
“Going by the IMF’s report, some Nigerian banks are kept afloat through continuous recourse to the Central Bank of Nigeria’s lending facilities as NPLs have increased from five per cent of total loans in June, 2015, to 15.6 per cent in Oct. 2017.
“This is an alarming 200 per cent increase,’’ Azikem said.
He, however, said that Asset Management Corporation of Nigeria (AMCON) was set up in 2010, with the mandate as a key stabilising tool to reviving the financial system for the purpose of efficiently resolving the NPLs of banks in Nigeria.
Azikem suggested that AMCON should adopt the Plain Vanilla Securitisation, the Synthetic Securitisation and Transfer of the Assets mechanism in resolving the NPLs problems for effective operation of the banking sector.
According to him, the synthetic securitisation approach allows AMCON to buy assets/NPLs of the banks and sell it to the investors after a specific period of time.
“For those of us who followed the Sky Bank story to date, can we confidently say the regulators have their acts right,’’ he asked.
Earlier, Mr Abubakar Lawal, the General Managing Director, GTI Group, stressed the need for proper regulation of operations in the banking sector for efficient service delivery.
Lawal assured commitment of the group to continuously enrich the public and operators in the industry with the latest trends in banking sector.
According to him, information is key, a well-informed economy stands the opportunity to explore, develop and enhance its economic growth.