The Nigeria Deposit Insurance Corporation (NDIC) and the House of Representatives committee on insurance and actuarial matters have lamented over the N1.84 trillion Non-Performing Loans (NPLs) in the banking industry in the year 2016.
However, N740 billion or 40per cent of the N1.85 trillion bad loans constituted Insider/Directors related loans collected in the year under review.
The committee, expressed grave concern over the increasing wave of NPLs particularly delinquent insider related facilities in various banks and its consequences on the stability of the nation’s banking
The Managing Director/Chief Executive (MD/CE), NDIC, Alhaji Umaru Ibrahim at the defended of the Corporation’s proposed 2017 budget before the House Committee 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 informed the Honourable members that 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 10per cent were NPLs where
N740 billion or 40per cent constituted Insider/Directors related loans.
In other banking subsectors like the microfinance banks, (MFBs), he noted 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 35per cent constituted Insider related/Directors loans.
The NPLs indicated a classic case of over-lending, accumulated interest charges and poor corporate governance.
Similarly, by extension, 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 atN51.7 billion or 55 per cent out of which N42.3 billion or 45per cent were Insider related/Directors loans.
The resultant effects of these negative trends would be poor earnings and erosion of shareholders fund.
The NDIC MD/CE observed that this development had posed serious issues bordering on corporate governance which were 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.
In his presentation, Ibrahim stated that in 2016, the Corporations actual income (net of provisions) was N85.020 billion which was expendable to the limit of 75per cent in line with the provisions of Fiscal Responsibility Act (FRA) 2007 while its total expenses was N31.551 billion.
This gave a net operating surplus of N53.469 billion out of which the Corporation made provision to transfer the sum of N42.775 billion or 80per cent into Consolidated Revenue Fund (CRF).
As at date (Feb 2017), the Corporation had made a total transfer of N35.893billion into CRF while awaiting the conclusion of its 2016 External Audit report before transferring the outstanding balance of
N6.882billion to the CRF in line with FRA 2007. With this the Corporation had surpassed its budgeted sum of N35.893billion as against the actual sum of N42.775billion transferred into CRF.
He urged the House Committee to approve the Corporation’s 2017 proposed budget of total income of N102.294 billion and expendable income of N76.720 billion.
This comprised Operating expenses of N43.227 billion or 49.94per cent of total expenditure and a total Capital expenditure is N43.323 billion or 50.06per cent of the total budget.
The Capital expenditure would be funded by the Corporation’s General Reserve Fund which stood at N45.670 billion as at 31st December, 2016. He concluded that a total ofN47.254billion is proposed as 80per cent net Operating surplus to be transferred into CRF in 2017.
Members of the Committee expressed their satisfaction with the level of execution of the Corporation’s 2016 Budget and its proposed 2017 Budget especially its commendable efforts by consistently contributing to the Consolidated Revenue Fund of the Federation and urged the Corporation to remain steadfast.
Speaking in response to the proposed budget, the Chairman of the Committee, Hon. Femi Fakeye, commended the Corporation on its performance in the 2016 budget where the NDIC stood out amongst its peers especially its transfer of huge sums into Consolidated Revenue Fund (CRF). He urged the Management not to rest on its oars and strive to achieve greater heights.
The Chairman of the House Committee went down memory lane to recall the 2008/2009 banking crisis. He requested the Corporation and other regulatory authorities to come with ideas and advise the members on the ways of salvaging the financial situation.
Towards this end, the Chairman called on the Corporation to bring forth credible proposals for the amendment of the NDIC Act, BOFIA as well as other banking related laws that would enable the Corporation to achieve greater performance in order to engender public confidence in the banking sector and ultimately guaranty financial system stability.