Nigeria wants banks to modify 65% ​​of loans amid economic fallout

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Nigeria’s central bank wants the country’s lenders to restructure nearly two-thirds of all loans to help borrowers cope with falling oil prices and the economic fallout from the coronavirus.

Loans worth 7.8 trillion naira ($ 20 billion) to 35,640 customers are already being reorganized out of the 18.9 trillion naira of credit across the sector, Central Bank of Nigeria Governor Godwin Emefiele said Monday. The central bank would be “more comfortable” if 65% of loans were restructured, he said.

The central bank allows lenders to change the terms of customer loans without provisioning them or classifying them as non-performing after imposing a moratorium on interest charges and principal repayment of debt. Banks are at the center of Nigeria’s plans to revive the economy through credit and distribute loans to farmers and manufacturers to boost local production.

A lockdown to contain the Covid-19 epidemic, falling oil prices and endemic dollar shortages have hammered the economy of Africa’s largest crude producer, hampering borrowers’ ability to pay off their debt.

“We believe that some companies will not survive the crisis, so restructuring them will simply be an exercise in hope“Adesoji Solanke, director of equity research for border banks and sub-Saharan Africa, told Renaissance capital. “A prudent bank will want to be on top of monitoring cash flow” and the development of its customers’ businesses, he said.

The ratio of non-performing loans to total credit improved to 6.4% in June from 11.1% a year earlier, while the industry’s average capital adequacy ratio stood at 15 % vs. 15.2% previously, Emefiele said.

Twenty-two of the country’s lenders are involved in the deals, he said. Emefiele was speaking after the monetary policy committee decided to hold on the benchmark interest rate at 12.5%.

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