Nigeria: H1 - Banks' Average NPL Ratio Maintains Downward Slide Despite Inflation, Interest Rate

As against the prediction by leading ratings agency, Fitch that Nigerian banks' Non-Performing Loan (NPL) will increase in 2024, a total of 10 leading banks beat the odds in the first half of the years closing the period with an average 7.49 per cent NPL as against 7.53 per cent in 2023 full financial year.

Analysis of the banks' half year ended June 2024 released to the Nigerian Exchange Limited (NGX), showed that the banks effectively managed their loans to customers amid double-digit inflation rate, insecurity in the country, unstable naira at the foreign exchange market, among other challenges. 

The banks are: FBN Holdings Plc, Zenith Bank Plc, Guaranty Trust Holdings Plc (GTCO), FBN Holdings Plc, United Bank for Africa Plc (UBA) and Access Holdings Plc. Others include; Fidelity Bank Plc, FCMB Group Plc, Stanbic IBTC Holdings Plc, and Wema Bank Plc.

Nigeria's inflation rate rose to 34.19 per cent in June 2024 (currently at 32.70per cent in September 2024), from 22.79per dent reported by National Bureau of Statistics (NBS) June 2023, driven by higher petrol prices that pushed up transport costs.

The hike in inflation rate has seen the Central Bank of Nigeria (CBN) under Mr. Yemi Cardoso raise the monetary policy rate (MPR) five times in an effort to curb the menace and promote economic stability. The first increase moved the rate from 18.75 per cent to 22.75 per cent, followed by subsequent hikes to 24.75 per cent, 26.25 per cent, and 26.75 per cent, with the most recent adjustment in September 2024 when the Monetary Policy Committee (MPC) raised it by 50 basis points to 27.25 per cent.

Further investigation by THISDAY revealed that UBA with NPL ratio at 6.20 per cent in H1 2024 from 5.80 per cent in H1 2023 is the only big financial institution with NPL ratio above regulatory requirement, as all others reported NPL ratio below five per cent requirement of Central Bank of Nigeria (CBN).

The management of UBA explained that its NPL slipped to 6.2 per cent in H1 2024 on account of further classification of some exposures.

"However, the portfolio remains resilient as we continue to monitor it," it added.

Access Holdings, according to an investigation by THISDAY, is the only financial institution with the lowest NPL ratio among the 10 banks.

Access Holdings saw its NPL ratio dropped from 2.80 per cent in 2023 FY to 2.70 per cent, while its NPL coverage dropped from 134.6 per cent in 2023 to 133.9 per cent as of June 2024, as the management stated that the decline is in line with its strategy of maintaining a healthy coverage for the loan portfolio...Read more on All Africa

Source: All Africa