CBN Scores Credit Bureaux Low As Bad Loans Rise 78% | Independent Newspapers Limited
Newsletter subscribe


CBN Scores Credit Bureaux Low As Bad Loans Rise 78%

cbn; interbank, external resesrves
Posted: Aug 25, 2016 at 4:31 am   /   by   /   comments (0)

Bamidele Ogunwusi


Lagos – Notwithstanding the efforts of credit bureaux in the country at providing robust credit reporting system, the Central Bank of Nigeria (CBN) has scored them low due to the rise in non-performing loans (NPLs) in the banking system to N649.63 billion as at May 2016.

The CBN governor, Godwin Emefiele, disclosed this in Lagos on Wednesday in his keynote address at the 2016 National Credit Reporting Conference organised by the Credit Bureau Association of Nigeria (CBAN).

The keynote address was read on his behalf by James Iyare, the branch manager, CBN, Lagos.

“The risk of non-performing loans (NPL) remains a major threat to our financial stability. For instance, the Financial Stability Report, released in May 2016, showed that in May 2016, NPL in the banking system rose sharply to N649.63 billion an increase of 78% year-on-year basis.

“This means that efforts need to be doubled in the area of credit information sharing in order to stem this worrisome trend”.

He said the three licensed private credit bureaux have been performing their functions and this has complemented the CBN’s Credit Risk Management System (CRMS) in ensuring the effective management of credit risk within the banking system.

Tracing the history of credit reporting in the country, Emefiele said it has its antecedents in the financial crisis of the late 1980s and early 1990s when large quantum of non-performing credits threatened the banking industry.

That era, he said, witnessed persistently rising incidence of abandoned facilities in Nigerian banks with attendant losses and erosion of banks’ capital.

To arrest the situation, the Central Bank of Nigeria in January 1998, established the Credit Risk Management System (CRMS), a public credit registry operated by the CBN that banks are required to report to and check-up all credits above N1 million.

The CBN, in furtherance of the powers conferred on it by Section 57 of the Central Bank of Nigeria Act, 2007, which was to license and regulate credit bureaux, released the guidelines for the Licensing, Operations and Regulations of Credit Bureaux in Nigeria in 2008, and in 2009, three privately owned credit bureaux – XDS Credit Bureau, CR Services Credit Bureau and CRC Credit Bureau were subsequently licensed by the apex bank.

The 2008 guideline was revised in 2013 in order to make it more robust and to address the weaknesses that were observed in the course of the implementation of the guideline.

He added that credit bureaux have been recording steady increase in the number of registered borrowers. From a mere 78,189 in December 2010, the total number grew to 18,640,000 in June 2012. The number as at June 30, 2016 stood at 33, 456, 922.

“I want to commend the bureau operators for this feat and charge them not to rest on their oars as we still have more grounds to cover if we must have a robust credit reporting system in Nigeria. The CBN in collaboration with IFC have continued to provide training to operators and regulators in order to build capacity in the credit reporting industry.

“We have just concluded the Bank Verification Number project and when the BVN is made available to the credit bureau, this will no doubt increase the quality of the credit reports.

“Also, in collaboration with other stakeholders, we have designed a uniform data reporting template for provision of data by credit providers to the three credit bureaux. This has reduced the problems associated with provision of data in several different templates to the credit bureaux”, Emefiele added.

Also speaking at the conference, Tunde Popoola, Managing Director of CRC Credit Bureau, said the credit reporting system was to address the challenges of information gap in the sector, noting that just 1000 institutions are utilising the services of credit bureaux in the country.