Bank directors owe commercial banks N740 billion, representing 40 per cent of N18.3 trillion non-performing loans in the banking industry, NDIC Managing Director/Chief Executive Umaru Ibrahim has said.
He said the debt constituted insider/directors related loans and was far above regulatory threshold of five per cent for commercial banks.
The NDIC boss raised alarm over what it called rising tide of Non Performing Loans in Nigeria’s banking industry. He spoke when members of the House of Representatives Committee on Insurance and Actuarial Matters visited the Corporation as part of its oversight function in Abuja.
The NDIC boss stressed that “while the banking industry indicated strong fundamentals in regulatory assessment and rating, regulators were concerned about the rising tide of non performing loans (NPLs) in the banking system.
He informed the legislators that as at December 2016, the 25 Deposit Money Banks (DMBs) had total loans portfolio of N18.53 trillion out of which N1.85 trillion or 10 per cent were NPLs.
In other banking subsectors like the microfinance banks, (MFBs), Ibrahim noted that “there were 978 MFBs in existence as at December, 2016 with total deposits liabilities of N158 billion and total loans and advances amounting to N195 billion out of which N87.75 billion or 45 per cent were NPLs where N68.25 billion or 35 per cent constituted Insider related/Directors loans.”
The NPLs he said “indicated a classic case of over-lending, accumulated interests charges and poor corporate governance.”
By extension, the existing 42 primary mortgage banks (PMBs) Ibrahim said “had total deposits liabilities of N69 billion but with total loans portfolio of N94 billion, which indicated another case of over-lending, accumulated interests, poor corporate governance and high ratio of NPLs which stood at N51.7 billion or 55 per cent out of which N42.3 billion or 45 per cent were Insider related/Directors loans.”
The resultant effects of this negative trend the NDIC boss warned “would be poor earnings and erosion of shareholders fund.
The NDIC boss observed that this development had posed serious issues bordering on corporate governance which were capable of eroding public confidence in the banking system.
He advocated for strict compliance with the existing code of ethics for bank directors and a review of the existing laws and regulations to proffer stiffer sanctions for Directors who exploit their positions and default in the payment of their credit facilities while still occupying directorship positions in the banks.
He called the attention of the legislators to the delay in the approval of 2016 budget which he said “contributed to the modest execution of the budget.
He restated the Corporations commitment to performance based budgeting system (PBBS) the essence of which is to ensure efficient allocation of resources to enable the Corporation achieve its strategic mandate.