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Bank’s debt recovery measures yield results as NPLs decline by 0.20% to 4.8% in Aug

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By Samuel Bankole

Debt recovery measures adopted by banks in the country have impacted positively on repayment by debtors as the Non-Performing Loans (NPLs) ratio declined to 4.8 per cent in August 2022, from 5.0 per cent in June 2022,

To this end, the Central Bank of Nigeria (CBN) has reiterated the need for banks to sustain its tight prudential regime, to ensure that the NPL ratio is kept below its 5 0 per cent prudential benchmark.

In a communique issued at the end of the Monetary Policy Committee (MPC) meeting on Tuesday in Abuja, the CBN Governor, Godwin Emefiele applauded the improvement in the Non-Performing Loans (NPLs).

“The Capital Adequacy Ratio (CAR) and the Liquidity Ratio (LR) remained above their prudential limits at 13.4 and 40.1 per cent, respectively, in August 2022,” Emefiele said.

The regulatory bank also disclosed that the broad money supply (M3) grew by 11.05 per cent in August 2022, compared with 8.66 per cent in July.

READ ALSO: Nigeria exceeds 2022 borrowing plans by N1 trln to accommodate fuel subsidy payments

“This was driven largely by the growth in Net Domestic Assets (NDA) of 26.19 per cent in July 2022, compared with 22.78 per cent in the preceding month.

“The sustained growth in Net Domestic Assets (NDA) was driven largely by increased claims on the Federal government and other financial corporations and the private sector,” the CBN Governor stated at the end of the MPC meeting in Abuja.

However, analysts are projecting that with the hike in the benchmark interest rate and Cash Reserves Ratio (CRR) to 15.5 per cent and 32.52 per cent respectively, the money supply may decline in the months to come.

Also, the increase in lending rate as a result of the hike in the benchmark rate could also precipitate poor debt repayment and subsequently increase the NPLs of banks.

Emefiele announced that the regulatory bank plans to mop up liquidity from the banking system as part of the measure to curb rising inflation and maintain tight liquidity in the economy.

The governor said the liquidity tightening measure was designed to stop speculative bids against the local currency and arrest the declining value of the local currency.

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