Nigerian Banks Defy Predictions as Non-Performing Loans Remain Stable in 2024
Against Fitch’s prediction that Nigerian banks’ Non-Performing Loan (NPL) ratios would rise in 2024, ten major banks have kept their NPLs steady, achieving an average ratio of 7.49% in the first half of the year compared to 7.53% in 2023. This outcome defies expectations given Nigeria’s ongoing economic issues, including inflation, currency instability, and high interest rates. Banks like Access Holdings, Zenith Bank, and FBN Holdings have demonstrated resilience through effective loan management practices, with most maintaining NPL ratios below the Central Bank of Nigeria’s (CBN) regulatory threshold of 5%.
Several banks provided insights into their performance. Access Holdings recorded the lowest NPL ratio, slightly declining from 2.80% in 2023 to 2.70% in H1 2024. UBA was the only major bank to exceed the regulatory limit with an NPL ratio of 6.2%, attributing this increase to the reclassification of some loans. Other institutions, including GTCO, managed stable NPLs by leveraging strategic impairment provisions and deleveraging in key markets, while Zenith Bank and FBN Holdings reported marginal adjustments in their NPL ratios.
Fitch maintains that Nigerian banks may still face rising NPLs due to inflation and elevated interest rates, as the Central Bank has raised its Monetary Policy Rate multiple times this year to curb inflation, reaching 27.25% in September 2024. However, the CBN’s stress tests and data show that NPL ratios are improving across the sector, highlighting progress in asset quality and risk management practices. Despite economic headwinds, the banks’ resilience and regulatory support suggest stability for the remainder of the year.
