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

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Seventeen banks have approached the Central Bank of Nigeria (CBN), seeking regulatory backup to restructure over 32,000 loans for individuals and businesses impacted by the novel Coronavirus (COVID-19) as at end of May 2020.

Deputy Governor of the Bank, Aishah Ahmad, said this volume of request represents 32.94 per cent of the total industry loan portfolio.

This is contained in the Central Bank of Nigeria Communique No. 130 of the Monetary Policy Committee Meeting held on May 28, 2020, with Personal Statements of Members available on the bank’s website.

In her personal notes she said, “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 the total industry loan portfolio, with the manufacturing and general commerce sectors constituting the bulk of the restructured facilities.”

Ahmad explained that the results from ongoing impact assessment of COVID-19 effects on impairment by banks indicate modest impact given regulatory policy measures already implemented, adding that 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.

She said the majority of the loans to be restructured were within the manufacturing and general commerce sectors.

However, Ahmed assured that 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.

She said gross credit increased by N3.0 trillion between end-May 2019 and end-April 2020, driven by the Loan to Deposit Ratio (LDR) policy.

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 CBN deputy governor added that 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.

CBN in March said it would allow lenders to give customers more time to repay loans and create a fund to combat the impact of the coronavirus pandemic, which triggered an oil price crash and weakened the currency.

Following from this, available information indicates that First City Monument Bank (FCMB) hinted in May that it was restructuring half of its loans, mainly involving the oil and retail sectors.

Before the pandemic, CBN bank forced banks to lend more in order to stimulate an economy mired in low growth.

Total loans grew from N3 trillion to N18.6 trillion over the last year ending in April, Ahmad said. The oil price crash also hurt energy companies, long the most favoured sector for bank loans.

In April, credit to the oil sector accounted for 26 per cent of all corporate loans, another MPC member, Adamu Lametek, said in the statement.

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