First Bank MD Warns Of Spike In NPLs From N1.5trn

The managing director/ chief executive officer of First Bank Nigeria, FBN Limited, Dr Adesola Adeduntan, has warned that bank customers are likely to default in their loan payment this year if they are not closely monitored by their banks.

Adeduntan told Thisday that the situation could pushup the Non-performing loan, NPL, figures as businesses are hit with  economic headwinds in the new year.

According to the Central Bank of Nigeria, CBN, figures the value of 12 banks NPL stood at over N1.5 trillion as at June 2022.

The First Bank chief executive said more collaborative effort is needed between commercial banks and customers to mitigate the problem of NPL amidst economic uncertainty projections for the country this year by those closely monitoring the nation economy.

According to Adeduntan “To prevent rising NPLs, businesses and their bankers will have to collaborate more and ensure timely flow of information to prevent surprises.

“Banks on their part will have to improve monitoring of their loan portfolio to quickly identify early warning signals for attention before a full-scale loan deterioration.

“Overall, businesses and their bankers must approach 2023 with a partnership mindset to ensure that a win-win outcome is achieved despite the anticipated macroeconomic challenges.”

He pointed out that expectedly, rising cost of debt and contracting demand would exacerbate the challenges that businesses would face this year, particularly for players operating in small-margins sectors of the economy.

He expalined that macro economic problem such as surging inflation, reduction in disposable income, fall in demand for essential commodities and services will further dip leaving most customers frustrated.
In spite of this, Adeduntan said more business opportunities will open in the financial sector for keen players to be exploited.

Such areas, he said include payments, digital security, mergers and acquisition, M&A, opportunities, partnership across segments and consumer lending.

“The Central Bank of Nigeria’s renewed drive on cashless policy has provided an opportunity for players in the financial services industry to enhance existing digital product offerings and create more attractive product offerings that will further reduce frictions in the payment process. This will help to reduce the financial exclusion gap, increase fees and commissions revenues, and improve overall viability and stability of the financial system,” he said.

“Increasing adoption of digital payments platforms will necessitate increased requirement for the security of payment channels. Thus, opportunities exist for players in the financial services industry to leverage robotics and artificial intelligence to improve security protocols on digital payment channels.”

“With the anticipated pressures on earnings, opportunities exist for big and liquid players to gain additional scale and market share through outright acquisition of fringe players with the right strategic fit.

“There is also an opportunity for two or more small and/or medium size players to merge their operations/businesses to obtain scale advantage.

“The growing number of Fintechs and licensed Payment Service Banks also presents an opportunity for improved partnerships across various categories of players in the financial services industry for both mutual and industry-wide benefits.

“Tightening financial conditions of the average household will create opportunities for consumer loans in several variants such as buy-now-pay-later (BNPL), salary advance, consumer asset finance, etc. The industry is already witnessing a rising trend in the creation of digital consumer loan product offerings. This is likely to intensify in 2023,” Adeduntan said.

NPLs has remained the bane of many banks in the country. For instance, financial analysts had blamed the collapse of defunct Diamond Bank majorly on huge NPL, which stood at over N700 billion by the time it desolved into Access Bank Plc.