The Central Bank of Nigeria (CBN) has acceded to requests by 17 commercial banks in the country to extend loan tenures of their customers considerably those in the manufacturing and general commerce sectors impacted by the COVID-19 crisis.
Deputy Governor, Central Bank of Nigeria (CBN) Aishah Ahmad, who made the disclosure in her monetary Policy Committee notes shared via the Twitter handle of the apex bank, stated that 17 banks submitted requests to restructure over 32,000 loans for individuals and businesses, as a fallout of the pandemic impact.
She said: “As at end of May 2020, staff reports indicate that 17 banks submitted requests to restructure over 32 thousand loans for individuals and businesses impacted by the pandemic, representing 32.94 per cent of the total industry loan portfolio, with the manufacturing and general commerce sectors constituting the bulk of the restructured facilities.”
She disclosed that the majority of the loans to be restructured were within the manufacturing and general commerce sectors.
“Results from ongoing impact assessments of COVID-19 effects on impairment by banks indicate a modest impact given regulatory policy measures already implemented,” Ahmad said.
She further expressed confidence that the close monitoring by authorities and enhanced risk management practices by financial institutions, would help to mitigate the emerging risks and preserve financial system stability.
The central bank in March, said it would allow lenders to give customers more time to repay loans and create a fund to combat the impact of the coronavirus pandemic, which triggered an oil price crash and weakened the currency.
FCMB also disclosed its intention in May to restructure half of its loans, mainly involving the oil and retail sectors.
Before the pandemic, the central bank had prevailed on banks to lend to businesses and producers in order to stimulate an economy emerging from recession, as a result, total loans grew from N3 trillion to N18.6 trillion over the last year ending in April, Ahmad noted.
The oil price crash also hurt energy companies, long the most favoured sector for bank loans. In April, credit to the oil sector accounted for 26% of all corporate loans, another MPC member, Adamu Lametek, said in the statement.
Nigeria’s economy faces worst recession in four decades – World Bank
Nigeria could be heading towards a severe economic recession, “the worst ever witnessed since the 1980s” the World Bank has predicted.
The bank attributed possible causes of the impending recession to be the collapse in oil prices coupled with the effects of the COVID-19 pandemic.
The Bank made the prediction in its latest Nigeria Development Update (NDU) titled: “Nigeria In Times of COVID-19: Laying Foundations for a Strong Recovery,” released on Thursday, the update estimated that Nigeria’s economy would likely contract by 3.2 per cent in 2020.
This projection assumed that the spread of COVID-19 in Nigeria would be contained by the third quarter of 2020, adding that if the spread of the virus becomes more severe, the economy could contract further.
“Before COVID-19, the Nigerian economy was expected to grow by 2.1 per cent in 2020, which means that the pandemic has led to a reduction in growth by more than five percentage points.
“The macroeconomic impact of the COVID-19 pandemic will likely be significant, even if Nigeria manages to contain the spread of the virus.
“Oil represents more than 80% of Nigeria’s exports, 30 per cent of its banking-sector credit, and 50 per cent of the overall government revenue. With the drop in oil prices, government revenues are expected to fall from an already low eight per cent of GDP in 2019 to a projected five per cent in 2020,” it stated.
According to the report, this comes at a time when fiscal resources are urgently needed to contain the COVID-19 outbreak and stimulate the economy.
It noted that the pandemic had also led to a fall in private investment due to greater uncertainty, and was expected to reduce remittances to Nigerian households, which in recent years had been larger than the combined amount of foreign direct investment and overseas development assistance.
“While the long-term economic impact of the global pandemic is uncertain, the effectiveness of the government’s response is important to determine the speed, quality, and sustainability of Nigeria’s economic recovery.
“Besides immediate efforts to contain the spread of COVID-19 and stimulate the economy, it will be even more urgent to address bottlenecks that hinder the productivity of the economy and job creation,” World Bank Country Director for Nigeria, Shubham Chaudhuri said.