• As CBN calls for credit information sharing to stem risks
Fresh facts have emerged that at N649.63 billion, the total amount of Non-Performing Loans (NPLs) in the banking industry is enough to obtain 12 international banking licenses and 25 national banking licences. The Financial Stability Report of the apex bank released recently showed that in May 2016, NPL in the banking system rose sharply by 78 per cent to N649.63 billion year–on-year basis.
Under the new regime that replaced universal banking, banks with N50 billion maximum capital base could operate internationally while national banks whose operations are confined to the country will be required to have N25 billion. On the other hand, regional banks which are allowed to operate in a minimum of five and a maximum of 10 contiguous states are required to have N15 billion.
In order to reduce the tide of the rising NPLs in the industry, the Central Bank of Nigeria (CBN) has called on individuals and corporate organisations to double efforts in credit information sharing.
Governor of the Central Bank of Nigeria Mr Godwin Emefiele, who made the call at the third National Credit Reporting Conference in Lagos expressed worry that bad loans remain a major threat to financial stability in Nigeria.
The theme of the conference, “Credit Bureau and Access to Finance: Nigeria’s Success Story,” he stated, was carefully chosen by the Credit Bureaux Association of Nigeria.
According to the governor, the reform policies of the bank boosted by availability of credit information have been yielding the needed results.
“This means that efforts need to be doubled in the area of credit information sharing in order to stem this worrisome trend.
“In the same vein, we have made it mandatory for all financial institutions to have data exchange agreements with at least two credit bureaux. All banks are required to obtain credit report from at least two credit bureaus before granting any facility to their customers whilst quarterly portfolio checks must also be carried out to enable them determine borrowers’ current exposure to the financial system,” he said.
Represented by James Iyari, a top executive of CBN, the governor, noted that the credit bureaux have been recording steady increase in the number of registered borrowers.
He added that from a mere 78,189 in December 2010, the total number grew to 18,640,000 in June 2012. The number as at 30th June, 2016 stood at 33, 456, 922.
Commending credit bureau operators for this feat Emefiele charged them not to rest on their oars as “we still have more grounds to cover if we must have a robust credit reporting system in Nigeria.
Accordingly, the CBN has recently approved the payment of one-off sign on fees with Credit Bureaux for all the microfinance banks and other micro financial institutions licensed by the CBN in order to support effective use of the infrastructure provided by the private credit bureaux with a view to deepening the subsector.
Also, in her presentation, CBN Director of Banking Supervision Department, Mrs Tokunbo Martins, disclosed that promoter(s) seeking to operate a Credit Bureau in Nigeria shall apply in writing to the Governor of the CBN, adding that such application for a Credit Bureau licence shall be accompanied with a non-refundable application fee of N250,000 made payable to the CBN, minimum capital requirement of N500,000,000 made payable to the CBN, 50 per cent of which will be released upon the grant of Approval-in-Principle, while the balance will be released upon the grant of Final Licence among others.
Represented by Mr Onyebuchi K. Ibedu, a Deputy Director in the Banking Supervision Department of CBN said the bank considered the development of an effective credit bureaux as cardinal to achieving its objective of ensuring that financial services are delivered at affordable cost to the disadvantaged and low-income segment of the society under its Financial Inclusion strategy. This, it hopes to achieve by looking towards replacing physical collateral with reputation collateral.
“It has long been established that a weak credit reporting regime constrains lending and poses a threat to the overall stability of the financial system.
“We have just concluded the Bank Verification Number project and when the BVN is made available to the credit bureaux, this will no doubt increase the quality of the credit reports,” the CBN’s director assured.