The Nigerian Deposit Insurance Corporation, NDIC, has blamed bank directors for being responsible for 40 per cent of the N1.85 trillion non-performing loans or bad loans in banks.
The Corporation also said the directors were responsible for about 40 percent of N139.45 billion bad loans in microfinance banks and mortgage banks.
Responding to demand by members of the House Committee on Insurance and Actuarial Matters, on the state of the Nigerian banking system, during 2017 budget defence in Abuja, Managing Director/Chief Executive, Alhaji Umaru Ibrahim
expressed concern over the increasing wave of non-performing loans (NPLs) particularly delinquent insider related facilities in various banks and its consequences on the stability of the nation’s banking system.
Ibrahim stressed that while the banking industry indicated strong fundamentals in regulatory assessment and rating, regulators were concerned about the rising tide of NPLs in the banking system.
He said: “As at December 2016, the 25 Deposit Money Banks (DMBs) had total loans portfolio of N18.53 trillion out of which N1.85 trillion or 10 percent were NPLs where N740 billion or 40 per cent constituted Insider/Directors related loans.
This was far above regulatory threshold of 5 per cent for the DMBs.”
Speaking about the state of other banking subsectors like the microfinance banks, (MFBs), he said: “That there were 978 MFBs in existence as at December, 2016 with total deposits liabilities of N158 billion and total loans and advances amounting to N195 billion out of which N87.75 billion or 45 per cent were NPLs where N68.25 billion or 35 per cent constituted Insider related/Directors loans.
The NPLs indicated a classic case of over-lending, accumulated interests charges, and poor corporate governance.
“The existing 42 primary mortgage banks (PMBs) had total deposits liabilities of N69 billion but with total loans portfolio of N94 billion, which indicated another case of over-lending, accumulated interests, poor corporate governance and high ratio of NPLs which stood at N51.7 billion or 55 per cent out of which N42.3 billion or 45 per cent were Insider related/Directors loans.
The resultant effects of these negative trends would be poor earnings and erosion of shareholders fund. Ibrahim observed that this development had posed serious issues bordering on corporate governance which was capable of eroding public confidence in the banking system.
He advocated for strict compliance with the existing code of ethics for bank directors and a review of the existing laws and regulations to proffer stiffer sanctions for Directors who exploit their positions and default in the payment of their credit facilities while still occupying Directorship positions in the banks.
NDIC records N53bn operating surplus in 2016 or Bank directors liable for 40% of N1.85 trn bad loans
Ibrahim also revealed that the NDIC recorded N53 billion as operating surplus for the 2016 operating year.
He said the Corporation in line with the Fiscal Responsibility Act (FRA) will transfer 80 percent of the surplus into the Consolidation Revenue Fund of the federation.
Ibrahim called the attention of the Honourable members to the delay in the approval of 2016 budget which contributed to the modest execution of the budget.
He restated the Corporation’s commitment to performance based budgeting system (PBBS) the essence of which is to ensure efficient allocation of resources to enable the Corporation achieve its strategic mandate.