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Nigeria targets 5% bad loan ratio for banks

By on April 7, 2011

THE Central Bank of Nigeria (CBN) has said that it would target a non-performing loan ratio of 5 per cent across the banking sector after Asset Management Corporation of Nigeria (AMCON) absorbed lenders’ existing bad loans.

AMCON announced last week it had cleared all bad bank loans and was on track to recapitalise lenders rescued in a $4 billion bailout 18 months ago by the end of the second quarter.

Samuel Oni, the CBN Director of Banking Supervision, said the regulator would not allow bad loans to stack up again to more than 5 per cent of total loans across the banking industry in the country.

“Our target is that the industry’s non-performing loan (NPL) ratio should not exceed five per cent,” Oni told reporters after a meeting of the bankers’ committee in Abuja.

“Before the advent of AMCON, the NPL ratio was about 50 per cent,” he said.

Seven of Nigeria’s 21 locally-listed banks have so far announced positive earnings for 2010, suggesting balance sheets are being repaired faster than expected after heavy write-downs and loan losses due to provisions following the bailout.

AMCON issued a total of N1.7 trillion ($11 billion) in bonds to buy non-performing loans which were valued at N2.2 trillion at the time of the bailout in 2009.

source : Tribune