Non performing loans in Nigerian banks rising – IMF

Stories by David Agba Abuja

Th e International Monetary Fund (IMF) says nonperforming loans (NPLs), across Nigerian banks have increased by more than double since 2015. Th e organization also said that the current 0.8 percent growth in the Nigerian economy in the fi rst half of 2017 is still not suffi cient to end poverty and reduce unemployment in the country.

Th e IMF said preliminary data for the fi rst half of the year indicate signifi cant revenue shortfalls, with the interestpayments to revenue ratio remaining high (40 percent at end-June) and projected to increase further under current policies.

“High domestic bond yields and tight liquidity continue to crowd out private sector credit. Given Nigeria’s low growth environment and the banking system’s exposure to the oil and gas sector, nonperforming loans increased from 6 percent in 2015 to 15 percent in March 2017 (8 percent after excluding the four undercapitalized banks).”

According to the IMF, “the economic backdrop remains challenging, despite some signs of relief in the fi rst half of 2017. Economic activitycontracted in the fi rst quarter of the year by 0.6 percent, mainly as maintenance stoppages reduced oil production.”

Th e IMF also noted in a statement issued at the end of its staff visit to Nigeria on Wednesday, August 2, that the country’s economic challenges persist in spite of the federal government’s implementation of a number of important measures, including Economic Recovery and Growth Plan, ERGP.

Th e federal government launched the ERGP to drive its economic diversifi cation strategy and pull the economy out of recession. Th e IMF visiting team led by Amine Mati, senior resident representative and mission chief for Nigeria, was in Nigeria between July 20 and 31 to discuss recent economic and fi nancial developments, update macroeconomic projections, and review reform implementation.

It said following four quarters of negative growth, the non-oil economy grew by 0.6 per cent between last year and this year, amid a rebound in manufacturing and continued strong performance in agriculture. Although various indicators suggest an uptick in activity in the second quarter of the year, helped by favourable base eff ects, it said headline infl ation, which decreased to 16.1 percent in June 2017, from 17.28 percent in April, remained high despite tight liquidity conditions.

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