Bad loans still a threat to Nigeria’s economy, says Emefiele

Godwin Emefiele, governor of the Central Bank of Nigeria (CBN), says non-performing loans (NPLs), otherwise known as bad loans, are still a threat to the financial stability of the Nigerian economy.

Emefiele, who was represented by James Iyari, branch controller of CBN Lagos’ office, at the third national credit reporting conference in Lagos on Wednesday, said credit bureaus in the country have helped stem the rise of non-performing loans.

He said the CBN has lived up to its responsibility of creating a rigorous system for protecting the financial system from non-performing loans.

“The reformed policies of the Central Bank of Nigeria have been yielding the needed results. Unfortunately, risk of non performing loans (NPL) remains a major threat to the financial stability of our great country,” he said.

“For instance, the financial stability report, released in May, 2016 by the Central Bank of Nigeria (CBN) show that in May 2016, non performing loans in the banking sector rose sharply to N649.6 billion.

Emefiele said the credit bureaus have a role to play in checking NPLs, adding that they have done a good job thus far. He added that they do not rest at this time in Nigeria’s economic life.

He said it is necessary for financial institutions in the nation to share information that can help in halting the growth of such bad loans.

He said the three private bureaus in Nigeria – CR Services Credit Bureau, CRC Credit Bureau and XDS Credit Bureau – have helped reduced lack of credit information, by moving from 38,000 registered Nigerians in 2010 to 33,456,000 in 2016.

“The CBN in collaboration with IFC (International Finance Corporation) have continued to provide training for operators in order to build capacity in the credit reporting industry.

“We have just concluded the Bank Verification Number project, and when the BVN is made available to the credit bureau, this would further increase the quality of credit reports.

“Also, in collaboration with other stakeholders, we have designed a uniform data reporting technique for provision of data by credit providers to three credit bureaus. This has reduced the problem associated with provision of data to credit bureaus.”

NIGERIA’S SUCCESS STORY

At the conference titled “Credit Bureaus and access  to finance: Nigeria’s sucess story”, it was revealed that credit bureaus in Nigeria have drastically reduced the emergence of NPLs.

According to CBN figures, bad loans stood at 38 percent of all loans in 2009, when three bureaus were licensed, but reduced to 3.6 percent in 2016.

Due to Nigeria’s economic challenges, bad loans rose to five percent in 2016.

On the World Bank Doing Business report, Nigeria’s ease of doing business has fallen from 120 in 2008, to 170 in 2016, but the ease of accessing credit have moved from 84 in 2008 to 29 in 2016.

This alludes to the success story of credit reporting in Nigeria.