The Central Bank of Nigeria (CBN) has revealed that banks’ total assets in the third quarter of 2022 rose by 21.58 per cent to N69.67 trillion as against N57.30 trillion recorded in October 2021.
Deputy Governor, Financial System Stability, CBN, Aisha Ahmad, and the Deputy Governor, Economic Policy Directorate, Dr. Kingsley Obiora stated this in their personal statement at the CBN Monetary Policy Committee (MPC) meeting held in November.
Also, the CBN said Non-Performing Loans (NPLs) ratio declined to 4.8 per cent in October 2022 from 4.9 per cent in the previous month, staying below the regulatory benchmark of 5.0 per cent.
According to Ahmad, “Notably, total assets rose to N69.67trillion in October 2022 from N57.30 trillion in October 2021, while total deposits rose to N43.05 trillion from N36.13 trillion over the same period.”
“Total credit also increased by N5.32 trillion to N28.81trillion between end-October 2021 and end-October 2022 with significant growth in credit to manufacturing, general commerce, and oil and gas sectors. The continued credit expansion particularly to output enhancing sectors is expected to further support economic activities. However, sustained regulatory vigilance is required to mitigate any potential crystallization of credit risk in the financial system in view of lingering macroeconomic risks.”
She reiterated that the financial system remains strong and continues to provide significant support for needed domestic economic resilience.
“Data provided by Bank staff showed stability in broad financial soundness indicators and sustained improvement in asset quality, alongside growing credit to the private sector. Capital adequacy ratio as at October 2022 was robust at 13.40 per cent above the minimum 10 per cent requirement. Industry liquidity was also strong at 40.1 per cent over the same period while the non-performing loans (NPLs) ratio declined further to 4.8 per cent in October 2022, compared to 5.3 per cent in October 2021. This reflects improvement in industry risk management practices and implementation of regulatory policies to manage NPLs such as the Global Standing Instruction (GSI) Policy. The results of stress tests conducted by staff, show that financial soundness indicators remained above minimum regulatory thresholds under mild to severe shocks, ”she added.
On his part, Obiora stated: “The banking system remained sound, safe and resilient to headwinds. The industry Non-Performing Loan (NPLs) ratio was 4.8 per cent at the end of October 2022, compared with 5.3 per cent at the end of the corresponding period of 2021, which was below the prudential maximum of 5.0 per cent.
“The decline in NPLs was attributable to write-offs, restructuring of facilities, Global Standing Instruction (GSI) and sound credit risk management by banks. Total assets of the banking industry showed an increase of N12.37 trillion or 21.58 per cent from N57.30 trillion in October 2021 to N69.67 trillion in October 2022, driven largely by balances with CBN/banks, investments, and credit expansion to the real sector. As a result, the total flow of credit to the economy increased fromN23.49 trillion in October 2021 to N28.81 trillion in October 2022, representing an increase of 22.66 per cent to the key sectors of the economy, including oil and gas, manufacturing, general, governments and commerce.”
However, addressing the fiscal arm of the government, a member of the MPC committee Adenikinju Adeola Festus, stressed that more responsible fiscal approach should be adopted by the Federal Government.
He said: “The worsening fiscal balances should also be addressed. Most indicators of fiscal balances are in the red. The reliance on monetary accommodation to enhance fiscal operations is costly to the economy both in the medium and long term. The revenue challenges of the government should be confronted headlong. The Bank should moderate further financing of the federal government and conclude on the securitisation of the FGN exposure to the CBN. In addition, the issue of oil theft and vandalization of pipelines and other government assets must be urgently addressed.”
