of N117bn bad loans mentioned above, Wema Bank plc provision for bad loan in six months of 2017 showed a significant increased by 43.7 per cent to closed at N88 million from N61 million in proceeding year of 2016. With the rising loan defaults by customers owing to some inside abuse not economic recession per said, these Five Tier-Two money deposit banks comprising Sterling Bank Plc, Diamond Bank and First City Monument Bank Plc have contributed to 117.4 billion Naira for bad loans in first half of 2017. The other two commercial banks are Union Bank of Nigeria Plc and Wema Bank Plc.
The amount which grew by 11bn Naira representing 10.38 percent to closed at N117bn is higher than N106 billion provided by the five banks for bad loans in first half of 2016 which is almost to the assertion of the International Monetary Fund (IMF) that bad loans had increased by 15 percent in the industry.
The breakdown showed that of the five commercial banks,Wema Bank provision for bad loan in half year of 2017 increased significantly by 43.7 per cent to N88 million from N61 million in half year of 2016. followed with Diamond Banks which its bad loans increased significantly while that of First City Monument Bank (FCMB) and Union Bank of Nigeria bad loan provision declined in figures
In case of Diamond Bank provision for bad loans closed the half year at N20 billion, an increase of seven per cent over N18.9 billion in half year of 2016 while Sterling Bank provision gained 11.4 per cent to N4billion as against N3.6 billion recorded in half year of 2016.
Meanwhile FCMB and Union Bank of Nigeria provision for bad loans dropped by 26.1 per cent and 38.8 per cent respectively.
A number of loan customers, both individuals and corporates are finding it difficult to meet their loan obligations leading to rising loan loss provisioning for the banks. This is also hampering the banks’ ability to create new loans. Nigerian banks are changing strategies in order to deal with the current economic challenges in order to satisfy all stakeholders.
Despite the recent challenges, there are huge banking opportunities in the Nigerian economy. Nigerian banks need to develop more constructive strategies to increase their share of the non-oil sector in their loan portfolios.
Amehnews recalled that the Nigeria Deposit Insurance Corporation (NDIC) managing director Umaru Ibrahim disclosed that bank directors were responsible for 40 per cent of the N1.85 trillion non-performing loans or bad loans in banks while defending the corporation’s 2017 budget before the House Committee on Insurance and Actuarial Matters as part of its oversight function.
The Corporation also revealed that directors were responsible for about 40 percent of N139.45 billion bad loans in microfinance banks and mortgage banks.
“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 where N740 billion or 40 per cent constituted Insider/Directors related loans. This was far above regulatory threshold of 5 per cent for the DMBs.
” Speaking about the state of other banking subsectors like the microfinance banks, (MFBs), he said: “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 indicated a classic case of over-lending, accumulated interests charges and poor corporate governance. “The existing 42 primary mortgage banks (PMBs) 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.