CBN, NDIC, risk managers, others consider ‘private AMCON’ on rising NPL

Worried by the rising non-performing loans (NPLs) in the banking sector, the Central Bank of Nigeria (CBN), the Nigeria Deposit Insurance Corporation (NDIC), risk managers and other stakeholders are considering ‘private AMCON’ as one of the measures to guide against another crisis.

The NPLs of banks rose by approximately 70 percent to N628.54 billion at end-June 2015, from N363.31 billion at end-December 2014. At 4.65 percent from 2.88 percent, the NPL ratio remained within the prudential limit of 5 percent, though trended closer to the regulatory threshold, reflecting greater levels of stress in the banking industry, the CBN stated in June 2015 financial system stability.

Tokunbo Martins, director, banking supervision, CBN, on Friday agreed that the rising NPL in banks was an issue, as she recalled that in 2010 during the crisis, the NPL ratio rose to 35 percent, which led to establishment of AMCON. Between 2010 and 2014, NPL dropped significantly to 2.8 percent. It started rising again in 2014, and at the end of 2015, it rose to 5 percent, which is the regulatory threshold. “It has moved higher than that,” Martins said.

This is coming as Martins and Folakemi Fatogbe, director of risk management, CBN, and chairman of RIMAN board of trustees, stated clearly, “AMCON does not have the capacity to buy more NPL.

“It has risen significantly enough for us to be concern and do something about,” Martins said in Lagos at a breakfast roundtable organised by Risk Managers Association of Nigeria (RIMAN) and Olisa Agbakoba Legal (OAL).

Martins attributed the rising NPL to macroeconomic challenges while stressing on the need to look at how NPL issues were being addressed in other jurisdiction.

Stakeholders present at the meeting, including those in the financial industry, CBN, NDIC, chief risk officers from the industry, a number of people from the industry, honourable members of the bench, Lagos high court, and federal high court, senior advocates and legal people, all agreed to set up a working group as part of measures towards addressing the rising NPL.