Nigerian banks’ bad loans that stood at 4.9% of total advances as of December 2021 fell further to 4.84% as at February this year, a Central Bank of Nigeria (CBN) report said.
The Monetary Policy Committee (MPC) of the CBN in a communique at the end of its meeting on Monday noted that the Liquidity Ratio (LR) remained above its prudential limit at 43.5 per cent in February 2022, while the Capital Adequacy Ratio (CAR), moderated slightly to 14.4 per cent in February 2022 from 14.5 per cent in December 2021.
Overall the MPC expressed confidence in the CBN’s regulatory regime and commitment to maintaining stability in the banking system, urging it to sustain its tight regulatory surveillance.
Nigerian banks’ asset quality stood at 6.1% of total loans in December 2020. Nigerian banks’ asset quality trends have fared better than that of Sub Sahara Africa peers, according to analysts at Renaissance Capital in a Feb 3 report on the sector.
They attribute this to, better quality loan books following the 2016 crises; the CBN’s forbearance measures; and the primarily corporate nature of Nigerian banks’ loan books.
Stanbic (FY21), Access and UBA have the highest concentration of stage 1 loans, accounting for 97%, 86% and 85% of 1H21 gross loans, respectively, according to Renaissance Capital.
FBNH, Zenith and FCMB have the largest proportion of stage 2 loans, screening at 23%, 21% and 21%, respectively.
During the year, Zenith saw the most significant increase in stage 3 loans, up 27% YtD in 1H21.
“Going into 2022, we do not expect a significant deterioration in asset quality. The regulator’s posture on forbearance, however, is worth monitoring to determine how trends will pan out,” the Renaissance Capital analysts said.