I am certainly biased having worked as a banker in Lagos [Wake up at 5 am, be at work at 6.30am to get systems up before others start coming. Leave work at 10pm. But get paid really well]. Yes, I do think that the most productive professionals in Nigeria are in the banking sector. And they are the most innovative to get out of troubles, fast. After them, you put telecoms who are also showing resilience. Yes, you can argue that the carpenter is working harder, but here, I have used two words – “productive” and “innovative”!
Yes, no matter what the economy has thrown to the banking sector, it has found a way to make money and avoid troubles. But in 2020, I was worried when Covid-19 switched off the nation via lockdowns. I wrote here that we could see an 8% Non-Performing Loans (NPL) ratio in the banking sector. Honestly, I was concerned about a potential avalanche of bad loans.
The number is out: they kept things low at 6.01% [the Central Bank of Nigeria prudential maximum threshold is 5.0%]. That is an achievement because in this business, you look at things in parts of a unit percentage as 0.1% of billions of naira is a huge amount of money.
“The Monetary Policy Committee (MPC), however, noted the marginal increase in the Non-Performing Loans (NPLs) ratio which rose to 6.01% at end-December 2020 from 5.88%at end-November 2020 and above the prudential maximum threshold of 5.0%. While noting that this development is not unexpected under the prevailing circumstances, it urged the Bank to strengthen its macroprudential framework to bring NPLs below the prescribed benchmark,” Central Bank of Nigeria MPC
For the FUGAZ (FBNH, UBA, GT Bank, Access Bank and Zenith Bank) – well done. Sure, there are other banks but those ones are marginal in the real scheme of things.
Update: Yet, looking at things technically, the 6% would have tracked my 8% if not for the regulatory forbearance from CBN: “Nigeria’s NPL ratio of 6% could have been worse than it currently is were it not for the regulatory forbearance granted by the central bank due to the Covid-19 pandemic” notes Nairametrics.
- Banks were allowed to restructure most of their loans deferring principal repayments for borrowers who faced cash flow challenges due to covid-19.
- Without the forbearance, the non-performance ratios of the banks could have been worse than the 6%.
(image, Nairametrics, resized for our size)
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