The Nigeria Deposit Insurance Corporation (NDIC) has disclosed that three Deposit Money Banks (DMBs)have been identified to have in their balance sheets 60 per cent of the N700 billion insider-related bad loans bedeviling the industry.
The NDIC Managing Director, NDIC, Umaru Ibrahim, who made the disclosure at the Financial Institutions Training Centre Thought Leadership Discussion Series in Lagos, said the level of non-performing loans in the industry could be lower if the banks were to adhere more to sound corporate governance.
The identities of the banks were not disclosed, but the NDIC boss said that lenders without strong corporate governance culture were already being shunned by foreign investors because of the importance they attach to sound corporate governance practices.
The Central Bank of Nigeria expects banks’ NPLs not to exceed five per cent, but many lenders have grown their NPLs to over 20 per cent in recent months.
The financial industry still harbours weaknesses in governance as seen in insider non-performing loans, unreported losses, huge exit packages for directors, over-domineering executive management, contravention of regulatory/prudential guidelines and lending limits, poorly appraised credits and weakening of shareholders’ funds, among others.
Speaking on the theme: “Strengthening the Banking System and Facilitating Sustained Economic Growth: Roles of the Regulators, Operators and the Banking Public,” Ibrahim, who was represented by NDIC Executive Director, Operations, Prince Aghatise Erediauwa, said a large part of the NPLs came from loans to oil and gas sector.
He regretted that many of the banks lending to key sectors of the economy do not have the right industry knowledge needed to properly assess the loans.
He said: “The bad loans we see today in banks are mainly due to large exposure to oil and gas sector. They expose themselves to the sector without the right industry knowledge. The banks go with the bandwagon effect, as once there is loan syndication, every lender will want to be part of it without understanding what is involved.”
According to Ibrahim, many of the banks are also undercapitalised, borrowing from the Central Bank of Nigeria.
Many banks still do not disclose the names of all their staff that are involved in fraud, he said.
He added: “A lot of oil and gas loans went bad and created huge NPLs. Banks were not knowledgeable of the oil and gas industry, telecom and power sectors. The banks are running helter-skelter instead of getting experts to handle the loans.”
