With aid of GSI, banks recover N50m bad loans in nine days – CBN

The Central Bank of Nigeria (CBN) has revealed that Nigerian banks have been able to recover about N50.32 million bad loans from debtors within nine-day the country commenced the operations of the Global Standing Instruction (GSI).

The CBN Director of Financial Policy and Regulation, Kevin Amugo, who made the revelation at a webinar organised by the Chartered Institute of Bankers of Nigeria (CIBN) policy dialogue, said the recovery was made possible by the lending banks through the activation of the GSI protocol.

The GSI policy became operational from August 1, 2020, as banks struggle to keep their NPLs ratio low to curb failure and instability in the industry.

The CBN had introduced the GSI as part of measures to curtail the rising Non-Performing Loans (NPLs) in the nation’s banks and its impacts on the industry.

Amugo said GSI was introduced by the regulatory to specifically support the banking industry in reducing the rate of unserviced loans, improve loan recovery and recovery efforts of banks.

The amount recovered was, however, insignificant compared with the total of N1.66 billion worth of bad debt triggered in 26,057 customers triggered by the lending banks.

Amugo said the size of the recovered NPLs was due to the fact that the CBN was still working on the GSI protocol for non-individual debtors, which means the recovery was made from individual loan defaulters.

However, data from the CBN showed that NPLs in banks were higher during the economic downturn and as the figure of NPLs rise, the instability in the sector worsens.

Between 2015 and 2017, when the country experienced sharp drop in crude oil prices, currency crisis as a result of the drop in foreign exchange inflows and the period of recession, the NPLs rose sharply from 5 per cent to 15 per cent.

The CBN report showed that the NPLs ratio declined from 6.6 per cent in April 2020 to 6.4 per cent in June 2020, however the figure still remains above the 6 per cent stipulated threshold by the CBN.

The record also shows that credit to the economy grew by N3.46 trillion, about 22 per cent, of which new credit in June 2020 alone accounted for N773 billion, up from N412.7 billion in May 2020.

The number of new borrowers similarly rose by about 42,000 to 93,578 from 51,700 in May. The huge credit output in the economy, the CBN said was underpinned by improved resilience of the banking system.