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Market Digest Nigeria

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CBN Says Banks’ Non-Performing Loans Reach N2tr

The Financial System Stability Report released on Wednesday by the Central Bank of Nigeria (CBN) has revealed that non-performing loans of banks operating in the country has reached N2.08 trillion as at December 31, 2016 against N1.68 trillion in June of the same year.

The central bank explained,this was as a result of rising inflationary trend, negative GDP growth, and the depreciation of the Naira last year.

CBN Governor, Mr Godwin Emefiele, said in the report that, “The banking sector witnessed major challenges from the negative domestic output growth, deteriorating macroeconomic indicators and global uncertainties.

However, the banking sector remained safe and resilient despite these challenges.”

The report said “key financial soundness indicators showed a decline in asset quality as the ratio of nonperforming loans (NPLs) to gross loans deteriorated in the second half of 2016 by 2.3 percentage points, compared with the levels at end-June 2016.”

It stated further that, “The  ratio  of  regulatory  capital  to  risk  weighted  assets  decreased  by  0.8 percentage points  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 points to 12.9 per cent at end-December 2016 from 13.8 per cent at end-June 2016.  Despite the marginal decrease, the ratios remained above the Basel minimum threshold.”

According to the report, “The return on assets declined by 1.0 percentage points to 1.3 per cent at end-December 2016 from 2.3 per cent recorded at end-June 2016, while the ratio of non-interest expenses to gross income increased to 63.8 per cent at end-December 2016 from 54.6 per cent recorded in the preceding half of the year.”

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