Fifty customers owe commercial banks in Nigeria a total sum of N5.59 trillion, representing 34 per cent of total industry credit exposure of N16.29 trillion, the Central Bank of Nigeria’s (CBN) 2016 Financial Stability report has stated.The study, released by the apex bank yesterday, also showed that as at the end of December 2016, loans to the oil and gas sector constituted 30.02 per cent of the gross loan portfolio of the banking system as credit to that sector grew from N4.5 trillion at the end of June last year, to N4.9 trillion.
“During the period under review, credit risk trended higher as the industry wide NPL ratio moved from 11.7 per cent to 12.8 per cent at the end of 2016, while non-performing loans grew to N2 trillion at end-December 2016 from N1.6 trillion at end-June 2016,” the report stated. Although the report did not give the identities of the 50 big bank debtors, it stated that the eight Domestic Systemically Important Banks (D-SIBs) accounted for N11.76 trillion (72.2per cent) of the aggregate industry loans of N16.29 trillion.
Noting that the banking sector witnessed a rise in non-performing loans due to weakening economic conditions during the review period, the report indicated that four D-SIBs recorded NPL ratios above the regulatory limit of 5.0 per cent. D-SIBs, according to the study, accounted for N20.87 trillion (69.06 per cent) of industry total assets of N30.22 trillion and N13.04 trillion (70.25per cent) of total industry deposits of N18.56 trillion. It, however, stated that loans to state governments declined marginally to N1.376 trillion from N1.386 trillion at end-June 2016.
The report also stated that other operational risk events reported during the period included the incidence of frauds and forgeries, increased cybercrime attempts and rising insecurity in some parts of the country.
“Cases of fraud and forgeries increased to 9,929 at end-December 2016 from 9,164 reported at end-June 2016. The total amount involved in the cases, however, reduced from N4.36 billion at end-June 2016 to N4.12 billion at end-December 2016. “Similarly, actual losses reduced to N1.003 billion at end-December 2016 from N1.38 billion at end-June 2016. Returns from banks showed that majority of frauds and forgeries were perpetrated by outsiders.
The frauds were committed mainly through suppression and conversion of customers’ deposits, illegal fund transfers, pilfering and ATM withdrawals,” it added. Furthermore, the study showed that the CBN received 1,183 complaints from consumers during the review period, a decrease of 19.69 per cent compared with 1,473 received in the first half of the year.
The number of complaints against commercial and merchant banks was 1,145 or 96.79 per cent, while those against other financial institutions (OFIs) and miscellaneous complaints totalled 38 or 3.21per cent. It revealed that the complaints were on ATM and e-payment-related issues, excess charges, dishonoured guarantees, dishonoured cheques, fraudulent withdrawals and deposit irregularities. According to the study, “A total of 928 complaints were resolved in the period under review compared with 1,157 resolved in the first half of the year, representing a decrease of 229 or 19.79 per cent.
“The total refunds to customers in the second half of 2016 was N16.64 billion and $3.35 million compared with N4.63 billion, $80,415.46 and €19,263.62 refunded at end-June 2016.” The Financial Stability report highlights developments in the financial system for second half of 2016.
The report is a barometer for appraising and monitoring the stability of the financial system such as assets, capital, and income/expense-based indicators for banks in particular and economy in general. The study attributed deterioration in banks’ asset quality to the rising inflationary trend, negative Gross Domestic Product (GDP) growth, and the depreciation of the naira.
The report indicated an increase in the ratio of core liquid assets to total assets by 2.3 percentage points to 16.3 per cent at end-December 2016 from 14.0 per cent recorded at end-June 2016. Also, the ratio of core liquid assets to short-term liabilities increased by 2.9 percentage points to 24.5 per cent at end-December 2016, compared with 21.6 per cent at end-June 2016.
The increase in the ratio of core liquid assets to both total assets and short-term liabilities reflects improved buffers to absorb short term obligation. For capital base indicators, the study noted that ratio of regulatory capital to risk weighted assets decreased by 0.8 percentage point to 13.9 per cent at end-December 2016, compared to 14.7 per cent at end-June 2016. Similarly, the ratio of Tier 1 capital to risk weighted assets declined by 0.9 percentage point to 12.9 per cent at end-December 2016 from 13.8 per cent at end-June 2016.
The report noted, despite the marginal decrease, the ratios remained above the minimum threshold. With regards to banking industry capital adequacy indicators, the ratio of nonperforming loans net of provision to capital for the industry increased to 38.4 per cent at end-December 2016 from 28.4 per cent at end-June 2016 while income and expense based on Return on Assets (ROA) declined by 1.0 percentage point to 1.3 per cent at end- December 2016 from 2.3 per cent recorded at end-June 2016, while the ratio of noninterest expenses to gross income increased to 63.8 per cent at end-December 2016 from 54.6 per cent recorded in the preceding half.
The ratio of interest margin to gross income deteriorated to 50.0 per cent during the review period from 61.4 per cent at end- June 2016, while the ratio of personnel expenses to non-interest expenses declined to 30.5 per cent at end-December 2016 from 41.2 per cent recorded at end-June 2016.
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