As of June 2024, Nigerian banks’ Non-Performing Loans (NPLs), commonly known as Bad Loans, have dropped to 3.9%, down from 4.8% in April 2024.
During the recent release of the minutes from the 296th MPC meeting in July, members of the Central Bank of Nigeria Monetary Committee announced this positive development in their personal statements.
One MPC member, Bala Bello, highlighted that the decrease in NPLs reflects an enhancement in industry risk management practices and the successful implementation of regulatory measures aimed at managing bad loans, such as the Global Standing Instruction (GSI) policy.
Another committee member, Bandele Amoo, expressed confidence in the stability and soundness of Nigeria’s banking sector as of the end of July 2024.
Amoo stated, “The NPL, Capital Adequacy Ratio (CAR), and Liquidity Ratio (LR) all remain within the prescribed regulatory thresholds.”
These developments occurred after the MPC’s decision to raise the country’s interest rate to 26.75% in an effort to combat the increasing inflation rate, which reached 34.19% in June 2024.
In April 2024, the Central Bank announced new minimum capital requirements for Nigerian banks as part of the efforts to achieve Nigeria’s $1 trillion economy target.
It is worth noting that the Central Bank had introduced guidelines on the GSI policy on July 13, 2020, aimed at improving loan recovery processes across the banking sector, with the policy coming into effect on August 1, 2020.