Banks in Nigeria are restructuring close to 41% of the loans in the country. This approach came became necessary when the Central Bank of Nigeria Placed a moratorium on interest charges and principal debt repayments to mitigate the adverse effect lower oil prices as a result of the coronavirus pandemic.
Loans amounting to 7.8 trillion naira ($20 billion) payable by 35,640 customers are being reorganized out of 18.9 trillion naira in credit across the industry, Central Bank of Nigeria Governor Godwin Emefiele said on Monday. Twenty-two of the banks in Nigeria are involved in the transactions, he said.
Emefiele said “If the CBN did not ask the banks to grant these forbearance to their customers, the loans will go bad immediately by our prudential ratios”. He was speaking after the monetary policy committee decided to hold the benchmark interest rate at 12.5%.
He added that the central bank would be more content if 65% of loans were being restructured.
The imposition of lockdown to contain the Covid-19 outbreak, a drop in oil prices and rampant dollar shortages have had an adverse effect to the West Africa nation hindering the ability of debtors to repay their debt.
The ratio of non-performing loans to total credit improved to 6.4% in June from 11.1% a year earlier, while the industry’s average capital adequacy ratio stood at 15% from 15.2% previously, Emefiele said.