Nigeria: Commercial Banks have written off N1.9 trillion bad debts in past 4 years

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In the last four years, following the 2015/2016 recession, the Nigerian banking industry has written off a minimum of ₦1.9 trillion of impaired loans from its loan portfolio. This volume of write-offs has been driven by the weak macroeconomic climate and the introduction of the IFRS 9 accounting standard in 2019.

This was disclosed by Agusto & Co in the report titled, “2020 Banking Industry Report” and released on Sunday. The credit rating agency linked the banks’ actions to weak macroeconomic fundamentals and the introduction of the International Financial Reporting Standard 9 (IFRS 9).

In the wake of the unprecedented COVID 19 pandemic, the Industry’s asset quality is further threatened given significant exposures to vulnerable sectors.

The Central Bank of Nigeria (CBN) has granted palliatives to banks in form of permitted loan restructurings to certain sectors that have been severely affected by the pandemic and we expect this to moderate the anticipated level of asset quality deterioration in the short term.

The credit rating agency stated that “Our assessment of the Industry’s financial condition is based on figures and information published in the approved annual reports of nineteen commercial banks and five merchant banks as at 31 December 2019.

These banks collectively accounted for an estimated 98% of the Industry’s total assets as at the same date and provide a good representation of the Industry.”