NDIC decries N1.85trn banks’ non-performing loans

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From Uche Usim, Abuja and Isaac Anumihe

Managing Director of Nigeria Deposit Insurance Corporation (NDIC), Alhaji Umaru Ibrahim, has expressed strong concern over the rising incidence of non-performing loans (NPLs) in banks, saying that the 25 deposit money banks had a total loan portfolio of N18.53 trillion out of which N1.85 trillion or 10 per cent were NPLs where N740 billion or 40 per cent constituted insider/Directors-related loans, which is  far above regulatory threshold of 5 per cent  for the Deposit Money Banks (DMBs).

In his 2017 Budget defence, yesterday, in Abuja before the House Committee on Insurance and Actuarial Matters, Ibrahim said that in other banking sub-sectors like the microfinance banks (MFBs), there were 978 MFBs in existence as at December 2016 with total deposit liabilities of N158 billion and a 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 indicated a classic case of over-lending, accumulated interests charges and poor corporate governance.

Similarly, the existing 42 primary mortgage banks (PMBs) had total deposit 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. This, he said, has resulted to poor earnings and erosion of shareholders fund.

The NDIC boss observed that the 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.

Ibrahim stated that in 2016, the corporation’s actual income (net of provisions) was N85.020 billion and was expendable to the limit of 75 per cent in line with the provisions of Fiscal Responsibility Act (FRA) 2007.

Similarly, its total expense was N31.551 billion, thus  giving  a net operating surplus of N53.469 billion out of which the corporation made provision to transfer the sum of N42.775 billion or 80 per cent  into Consolidated Revenue Fund (CRF).  With this, he said, the corporation had surpassed its budgeted sum of N35.893 billion as against the actual sum of N42.775 billion transferred into CRF.

He urged the House Committee to approve the corporation’s 2017 proposed budget of total income of N102.294 billion and expendable income of N76.720 billion.

“This comprised operating expenses of N43.227 billion or 49.94 per cent of total expenditure and a total capital expenditure is N43.323 billion or 50.06 per cent  of the total budget. The capital expenditure would be funded by the corporation’s General Reserve Fund, which stood at N45.670 billion as at December 31, 2016,” he said, adding that a total of N47.254 billion is proposed as 80 per cent net operating surplus to be transferred into CRF in 2017.

Earlier, the Chairman of the committee, Femi Fakeye, commended the corporation on its performance in the 2016 budget where the NDIC stood out among its peers especially its transfer of huge sums into Consolidated Revenue Fund (CRF). He urged the management not to rest on its oars and strive to achieve greater heights.

Fakeye recalled the 2008/2009 banking crisis urging the corporation and other regulatory authorities to come with ideas and advise the lawmakers on ways of salvaging the financial situation.

He told the corporation to bring forth credible proposals for the amendment of the NDIC Act, BOFIA as well as other bank-related laws that would enable the corporation to achieve greater performance in order to engender public confidence in the banking sector and ultimately guaranty financial system stability.

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