There are a number of impacts to the Nigerian economy as a result of non-performing loans. Some of the effects are briefly discussed below:
1. There has been a serious cut in the importation and a refusal to accept a letter of credit. This has seriously affected international trade and the importation of stocks into the country.
2. There has been a serious problem of trust in the banking sector by customers. Many can no longer feel free to go to bed because they don’t know what will happen to their money.
3. High credit risk exists and is a high potential risk if not addressed quickly
4. There is the problem of low wealth and poor levels of development, which currently affect Nigeria as a whole.
5. This problem has also caused job losses. Most banks are forced to relieve some of their staff from their jobs.
6. With the problem of interbank transactions, there has been a shortage of liquidity and an acute shortage of credit.
7. Most banks now experience what could be described as a cash drain as customers withdraw their money.
8. There are also large fluctuations in the development of the stock market.
9. Most banks are characterized by a ‘corporate financial loss’ as a result of the
bad loans
10. Also important is the decumulation of foreign exchange reserves and the pressure on
exchange rate, that is, depreciation.
11. There is also the problem of uncertainty in the industry-banking sector.
12. Finally, the economy faces a credit crunch.
ABSTRACT
This work, within its capacity, has dealt extensively with the current and prevalent national problem of nonperforming loans and its effects on banks and the economy in general. This work took off by deeply explaining the concept of banking and bad debt in relevance to the contemporary problem.
The causes of bad debts are also explained, while the effects of non-performing loans (bad debts) on banks and the Nigerian economy are also disclosed.
The theme could not be seen in its widest perspective due to the time and space contract, however justice has been done to the theme.
CONCLUSION
The issue of non-performing loans and Nigerian banks is a hot topic, not only nationally but also globally. Experts and observers have always been warily watching how this has been affecting business globally. It has been established here that there is a problem of delinquency and also that this problem has caused serious and alarming challenges at all national levels. However, some measures are suggested here as a way to curb future recurrence of such in the future.
RECOMMENDATION
It is believed that if these points are considered properly, they could be good ways to save the nation from its current situation and prevent it from happening again in the future.
Yo). The CBN will ensure proper bank management by establishing more viable regulations and monitoring plans.
ii). Banks are expected to have trustworthy and competent CEOs to enhance good corporate governance.
iii). The finance ministry should develop modalities to improve the transparency of banks and prevent suspicious banking practices.
iv). Banks must maintain a mandatory reserve for uncollectible accounts.
