Meanwhile, the CBN also yesterday said it will this year allow banks to write off bad loans for which they have already made provisions to help them to clean up their balance sheets. Pressure has been building on the country’s banks, whose loan books have been hit by Nigeria’s shrinking economy, plunging currency and foreign exchange shortages following the slump in oil prices.
Banks had asked the central bank to amend its rule requiring them to keep non-performing loans on their books for one year even after they have been fully provided for.
The Central Bank has granted them permission to write off these bad loans but this will be a one-off that will only apply until the end of this year.
“In view of the current macroeconomic challenges … the CBN hereby grants a one-off forbearance, this year 2016, to banks, to write-off fully provided NPLs without waiting for the mandatory one year,” the bank said in a circular dated July 28 and published on its website on Tuesday.
Non-performing loans are expected to jump to 12.5 percent of total loans this year, up from the central bank’s target of 5 percent at the end of last year, as banks suffer a hangover from an oil industry credit boom that ended abruptly in 2015, according to Augusto & Co, Nigeria’s main rating agency. Last week, Diamond Bank said its non-performing loan ratio rose to 8.9 percent by the first half, but expects it to fall to 7.5 percent by year-end. Rival FCMB expects to restructure 25 percent of oil and gas loans in the third quarter after it restructured 50 percent of those loans last year.