The Nigerian Deposit Insurance Corporation (NDIC) says most of the non-performing loans by the deposit money banks are insiders loan availed directors of the institutions.
This was disclosed by the Director, Bank Examination Department of the NDIC, Adedapo Adeleke, at the just-concluded workshop for business editors and finance correspondents in Kano.
“Regrettably, between 1994 and 2011, we closed down over 50 banks, and what we discovered over time is that most of the loans that dragged these banks down were insider loans given to their directors,” Adeleke said.
The Managing Director of NDIC, Umar Ibrahim, had said that bank directors are responsible for 40 percent of the N1.85 trillion non-performing loans or bad loans in banks.
He also revealed that directors were responsible for about 40 percent of N139.45 billion bad loans in microfinance banks and mortgage banks.
Ibrahim stressed that while the banking industry has strong fundamentals in regulatory assessment and rating, regulators are concerned about the rising tide of Non-Performance Loans (NPLs) in the banking system.
As at December 2016, the 25 Deposit Money Banks (DMBs) had a total loans portfolio of N18.53 trillion out of which N1.85 trillion or 10 percent were NPLs where N740 billion or 40 percent constituted insider/directors related loans. That was far above the regulatory threshold of 5 percent for the DMBs.
Adeleke disclosed that while the current economic growth is expected to ease the impairment on the banks, the NDIC will tighten its nose around supervision with the introduction of the “expected loss rules” which will compel the banks to make provision for performing loans that are expected to go bad as a result of a prevailing situation.”