Total banking industry assets rise by N5.82trn in one year

THE total assets of the Nigerian banking industry rose by N5.82 trillion (in one year) to N53.64 trillion in June 2021, up from N47.82 trillion in June 2020.

Similarly, total deposits rose from N28.42 trillion to N33.85 trillion year on year, as contained in the Personal Statements by the Monetary Policy Committee (MPC) Members at the 137 MPC Meeting of July 26-27, 2021.

The statements obtained on Friday showed that total credit to the economy also rose from N18.90 trillion in June 2020 to N22.04 trillion in June 2021, signaling that the Loan to Deposit Ratio (LDR) policy of the Central Bank of Nigeria (CBN) is working.

A member of the committee, Adenikinju Adeola Festus said that a presentation by bank staff on the Banking System Stability shows that the financial soundness indicators are all trending in the right direction. According to him, the banking system remains strong, resilient, and sound.

“Capital Adequacy Ratio at 15.5 per cent is slightly above the prudential requirement of 15 per cent; Non-Performing Loans Ratio is 5.7 per cent, in June 2021, down from 5.8 per cent in May 2021.

“This is driven largely by the implementation of the GSI policy and strengthening of risk management practices. Liquidity Ratio as of June 2021 stood at 41.3 per cent, clearly above the prudential requirement above 30 per cent,” he stated.

The Global Standing Instruction (GSI) is a policy of the Central Bank of Nigeria (CBN) aimed at facilitating improved credit repayment culture in the country; reduce non-performing loans (NPLs), and promote watch-listing of chronic loan defaulters in the Nigerian Banking System.

Meanwhile, Adeola Festus said the credit expansion to all the sectors of the economy, in particular manufacturing, oil and gas and general commerce is good for the economy.

According to him, the CBN intervention funds are delivering on their mandate and boosting credits to the Micro small and Medium Scale Enterprises (MSMEs) and households’ credits.

He revealed that personal and households’ loans are rising after declining in 2020.

He said: “Development finance interventions rose by 39.33 per cent to N326,22 billion in May/June from N234.14 billion in March/April 2021. However, the credit market in formal banking is tightening as interest rate bands are narrowing.

“Lending rates increased relative to the saving rate, thus widening the interest rate spread. This is reflective of increased risks and inflationary considerations of the Deposit Money Banks (DMBs).”

He admitted that the liquidity conditions in the economy remain tight due to open market operations, Cash Reserve Requirement (CRR) debits and revenue remittances by government agencies.

Another member of the committee, Asogwa, Robert Chikwendu disclosed that system liquidity remained ample, even though aggregate domestic credit grew by only 4.30 per cent in June 2021 compared with 4.79 per cent in May 2021.

While credit to central government declined during this period, the credit to the private sector grew, just as he attributed the progress to the sustenance of the CBN’s credit enhancing policies.

“The banking sector itself remains stable and resilient, with strong liquidity and capital adequacy ratios.

“The ratio of gross nonperforming loans (NPLs) to total loans further declined from 5.8 per cent in May to 5.7 per cent in June 2021. Interestingly, repayments and recoveries were noted in key sectors including, oil and gas, manufacturing, construction and agriculture,” he stated.

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