The Nigeria Deposit Insurance Corporation (NDIC) has identified three commercial banks to have in their balance sheets 60 per cent of the N700 billion insider-related bad loans bedevilling the industry.
Speaking at the Financial Institutions Training Centre Thought Leadership Discussion Series in Lagos, the NDIC Managing Director, Umaru Ibrahim, said the level of non-performing loans in the industry could be lower if the banks were to adhere more to sound corporate governance.
The identities of the banks were not disclosed, but the NDIC boss said that lenders without strong corporate governance culture were already being shunned by foreign investors because of the importance they attach to sound corporate governance practices.
The Central Bank of Nigeria expects banks’ NPLs not to exceed five per cent, but many lenders have grown their NPLs to over 20 per cent in recent months.
The financial industry still harbours weaknesses in governance as seen in insider non-performing loans, unreported losses, huge exit packages for directors, over-domineering executive management, contravention of regulatory/prudential guidelines and lending limits, poorly appraised credits and weakening of shareholders’ funds, among others.
Speaking on the theme: “Strengthening the Banking System and Facilitating Sustained Economic Growth: Roles of the Regulators, Operators and the Banking Public,” Ibrahim, who was represented by NDIC Executive Director, Operations, Prince Aghatise Erediauwa, said a large part of the NPLs came from loans to oil and gas sector.
He regretted that many of the banks lending to key sectors of the economy do not have the right industry knowledge needed to properly assess the loans.
The immediate past President, Chartered Institute of Bankers of Nigeria, Segun Ajibola, also called for quality regulation and examination of banks to dictate poor corporate governance issues on time.
Ajibola said: “It is lack of corporate governance that will allow credit to go out without due approval. We need to tackle this challenge at the regulatory and operators levels to achieve the desired result.”
Also speaking, Managing Director/CEO, Sterling Bank Plc, Abubakar Suleiman, called for specialisation by the banks to enable them handle credits better.
Suleiman also said the high operational cost was affecting the rates at which banks give out loans.
