FINANCIAL STABILITY REPORT – JUNE 2020

FINANCIAL
STABILITY
REPORT


JUNE 2020


Contents
Contents ...................................................................................................................... I
LIST OF FIGURES ..................................................................................................... V
LIST OF TABLES ..................................................................................................... VII
LIST OF BOXES ....................................................................................................... IX
LIST OF ACRONYMS ................................................................................................ X


FINANCIAL STABILITY REPORT – JUNE 2020


FINANCIAL STABILITY REPORT – JUNE 2020

III


Revised Nigeria Cheque Standards and Cheque Printers Accreditation


5.1
FINANCIAL STABILITY REPORT – JUNE 2020

IV


FINANCIAL STABILITY REPORT – JUNE 2020

V


LIST OF FIGURES

FIGURE 1.4 GROSS EXTERNAL RESERVES SHOWING CBN, FGN &
FIGURE 2.5 DISTRIBUTION OF BANK LOANS AND ADVANCES BY MATURITY 27
FIGURE 2.7 CONCENTRATION RATIOS OF THE BANKING INDUSTRY ASSETS
FIGURE 2.8 AVERAGE MONEY MARKET RATES MOVEMENTS JANUARY –
FIGURE 3.9 : INDUSTRY LIQUIDITY RATIOS AT PERIODS 1-5 AND
FIGURE 3.12 DISTRIBUTION OF COMPLAINTS RECEIVED (IN PERCENTAGES)
FINANCIAL STABILITY REPORT – JUNE 2020

VI


FINANCIAL STABILITY REPORT – JUNE 2020

VII


LIST OF TABLES
TABLE 1:9 FOREIGN EXCHANGE FLOWS THROUGH THE CBN (US$ MILLION)
TABLE 2:5 FINANCIAL POSITION OF FINANCE COMPANIES AT END-JUNE 2020
TABLE 2:7 MATURITY STRUCTURE OF LOANS & ADVANCES AND DEPOSIT
TABLE 2:9 DOMESTIC AND FOREIGN PORTFOLIO PARTICIPATION IN
TABLE 2:10 : NUMBER AND VALUE OF FINANCING STATEMENTS ON THE
TABLE 2:11 NUMBER AND VALUE OF FINANCING STATEMENTS REGISTERED
IN RESPECT OF WOMEN AND WOMEN-OWNED BUSINESSES ON THE
TABLE 3:1 SELECTED FINANCIAL SOUNDNESS INDICATORS OF THE
FINANCIAL STABILITY REPORT – JUNE 2020

VIII


TABLE 3:8 MATURITY PROFILE OF ASSETS AND LIABILITIES AT END-JUNE


FINANCIAL STABILITY REPORT – JUNE 2020

IX


LIST OF BOXES
BOX 1: CBN COUNTER-MEASURES TO MITIGATE THE COVID-19 PANDEMIC.31
BOX 2: ELIGIBILITY CRITERIA FOR CONSIDERING BANKS REQUEST FOR
REGULATORY FORBEARANCE ON A CREDIT IMPACTED BY COVID-19


FINANCIAL STABILITY REPORT – JUNE 2020

X


LIST OF ACRONYMS
AMCON
Asset Management Corporation of Nigeria
AML/CFT
Anti-Money Laundering and Combating the Financing of Terrorism
BDCs
Bureaux de Change
BOI
Bank of Industry
BOA
Bank of Agriculture
BRICS
Brazil, Russia, India, China, and South Africa
BVN
Bank Verification Number
CACS
Commercial Agriculture Credit Scheme
CAR
Capital Adequacy Ratio
CBN
Central Bank of Nigeria
COB
Currency Outside Banks
CRMS
Credit Risk Management System
DAX
Deutscher Aktienindex (German stock index of 30 major German
companies)
DCs
Depository Corporations
DFIs
Development Finance Institutions
DMBs
Deposit Money Banks
EBAs
Eligible Bank Assets
ECB
European Central Bank
EGX CASE

Egypt Stock Exchange (Cairo and Alexandria Stock Exchange) 30
Stock Index
FAO
Food and Agriculture Organisation
FATF
Financial Action Task Force
FCs
Finance Companies
FGN
Federal Government of Nigeria
FMBN
Federal Mortgage Bank of Nigeria
FRACE
Financial Regulation Advisory Council of Experts
FSIs
Financial Soundness Indicators
FSR
Financial Stability Report
FSRCC
Financial Services Regulation Co-ordinating Committee
FINANCIAL STABILITY REPORT – JUNE 2020

XI


GDP
Gross Domestic Product
GSE
Ghanaian Stock Exchange
HHI
Herfindahl-Hirschman Index
ICE
Intercontinental Exchange
IFRS
International Financial Reporting Standards
IMF
International Monetary Fund
KYC
Know Your Customer
M1
Narrow Money Supply
M2
Broad Money Supply
M3
M2 plus CBN Bills held by the money holding sectors
MENA
Middle East and North African Countries
MFBs
Microfinance Banks
MICEX
Moscow Interbank Currency Exchange
MoUs
Memoranda of Understanding
MHSs
Money Holding Sectors
MPR
Monetary Policy Rate
NBS
National Bureau of Statistics
NCR
National Collateral Registry
NDC
Net Domestic Credit
NDIC
Nigeria Deposit Insurance Corporation
NEXIM
Nigerian Export-Import Bank
NIBSS
Nigerian Inter-bank Settlement System
NMRC
Nigeria Mortgage Re-finance Company Plc
NPLs
Non-Performing Loans
NSE ASI
Nigerian Stock Exchange All-Share Index
NSE 20
Nairobi Stock Exchange 20-Share Index
NYMEX
New York Mercantile Exchange
OBB
Open Buy Back
OFIs
Other Financial Institutions
ODCs
Other Depository Corporations
FINANCIAL STABILITY REPORT – JUNE 2020

XII


OPEC
Organisation of Petroleum Exporting Countries
ORB
OPEC Reference Basket
PAIF
Power and Aviation Infrastructure Fund
PENCOM
National Pension Commission of Nigeria
PFAs
Pension Fund Administrators
PFCs
Pension Fund Custodians
PMBs
Primary Mortgage Banks
PoS
Point of Sale
PSV 2020
Payments System Vision 2020
ROA
Return on Assets
ROE
Return on Equity
RTGS
Real-Time Gross Settlement System
S&P/TSX
Standards and Poor’s Composite Index of the Toronto Stock Exchange
SEC
Securities and Exchange Commission
SMEs
Small and Medium Enterprises
WAMZ
West African Monetary Zone
WEO
World Economic Outlook
WTI
West Texas Intermediate

FINANCIAL STABILITY REPORT – JUNE 2020

GOVERNOR’S STATEMENT
In the review period, the global economy was affected by the rapid spread of the novel
coronavirus (Covid-19), prompting the World Health Organization to declare Covid-19
a global pandemic. To reduce the spread of the virus, most countries imposed
temporary lockdowns on economic activities, leaving only essential services, leading
to an unprecedented decline in global economic output. The tripartite effects of the
pandemic on public health, the financial and the economic sectors created enormous
challenges for public policy, including macroeconomic management. In response,
extraordinary policies were initiated to manage the human, economic and social
consequences of the pandemic.

Global output was estimated to contract by 4.9 per cent in 2020, as the global economy
underwent a deep and synchronized contraction in the first half of 2020. Also, global
inflation was estimated at 0.4 per cent in 2020, as households and businesses faced
heightened uncertainty which delayed consumption and investment, thereby
exacerbating the ensuing economic downturn and slowing recovery.
In a bid to contain the spread of the Covid-19, the Federal Government of Nigeria
imposed lockdown restrictions which led to the disruption of most economic activities
and weak performance of key macroeconomic variables. Consequently, output
contracted by 2.18 per cent, during the review period, in contrast to an expansion of
2.42 per cent in the preceding half-year.
Headline inflation increased to 12.56 per cent, compared with 11.98 per cent at endDecember 2019, driven largely by the persistent increase in the prices of food items,
caused by disruptions to supply chains following the restriction of movements.

The Bank responded swiftly to the adverse impact of the pandemic through a suite of
policy measures, including interventions and stimulus packages to businesses and
households. These were aimed at stabilising the financial markets and ensuring
adequate credit flow to critical sectors.
The banking industry was supported through the institution of monetary and regulatory
policies that were aimed at strengthening the operational resilience of banks in the
face of the disruptive business environment. Consequently, the financial soundness
indicators of the industry remained stable, as assets and capital base indicators
remained above the regulatory thresholds, providing confidence to businesses,
investors and households.
Notwithstanding the prevailing domestic and global uncertainties, the Bank is
optimistic that the easing of the lockdown and the gradual resumption of economic
activities supported by broad-based monetary and fiscal policy measures would
continue to strengthen financial system resilience.
Godwin I. Emefiele, CON
Governor, Central Bank of Nigeria

FINANCIAL STABILITY REPORT – JUNE 2020

FOREWORD
In the first half of 2020, weak global growth persisted, largely reflecting the
monumental shocks from the adverse impact of the Covid-19 pandemic.
Consequently, global output was projected to contract by 4.9 per cent in 2020,
although it is expected to rebound in 2021, growing by 5.4 per cent. The growth
optimism is based on the unprecedented fiscal, monetary and regulatory responses to
mitigate the effects of the pandemic on households and firms, reinforced by positive
news on vaccine development and increasing worldwide deployment.
Similarly, major stock markets experienced bearish performance, owing to the
combined adverse effects of the pandemic, US-China trade war, geo-political
uncertainties and rising debts which depressed investors’ confidence. Furthermore, oil
prices declined significantly, arising from crude oil surplus and massive sell-offs in the
global oil market.
In the foreign exchange market, most currencies depreciated against the US dollar.
However, the Japanese yen appreciated marginally against the US dollar as a result
of strong export demand.
In Nigeria, the lockdown measures introduced to contain the spread of Covid-19
disrupted economic activities. In response, the Monetary Policy Committee (MPC)
took several decisions to ease financial conditions to support growth as well as
sustained development finance interventions in critical sectors of the economy.
To ensure the safety and soundness of the banking system, banks were required to
highlight effects of Covid-19 on their operations and measures taken to mitigate them.
Furthermore, the Bank continued with the enhanced supervisory regime for Domestic
Systemically Important Banks to sustain financial system stability.
This edition of the Financial Stability Report is in six sections. Section one reviews
global and domestic developments. Section two discusses developments in the
financial system, while section three covers regulatory and supervisory activities and
highlights key stability issues. Key developments in the payments system are
discussed in section four, while sections five and six highlights the key risks and the
outlook for the financial system.
This Report is intended to contribute to financial stability by improving the
understanding of risks in the financial environment and the Bank’s response to
developments in the system. It is, therefore, highly recommended to market
participants, investors, the academia and the general public.

Aishah N. Ahmad, CFA
Deputy Governor, Financial System Stability


FINANCIAL STABILITY REPORT – JUNE 2020

EXECUTIVE SUMMARY
Global output was projected to contract by 4.9 per cent in 2020, from the 2.9 per cent
achieved in 2019, largely owing to the adverse effect of the Covid-19 pandemic. Global
inflation trended downward, owing mainly to weaker aggregate demand and lower
commodity prices.
In the review period, the international stock markets were generally bearish, influenced
majorly by the adverse effects of the Covid-19 pandemic, trade tensions between the
United States and China and growing public and private sector debts. In the foreign
exchange markets, major currencies depreciated against the US dollar, with the
exception of the Japanese yen, which appreciated during the review period. In
response to the headwinds generated by the Covid-19 pandemic, most central banks
reduced their policy rates, among other measures.
The impact of the Covid-19 pandemic on global financial markets, institutions, and its
dampening effect on crude oil prices slowed down economic activities and lowered
revenue accruable to governments and businesses, thereby heightening risks to
financial stability.
In Nigeria, the gross domestic product contracted by 2.18 per cent in the first half of
2020, largely attributed to disruption of economic activities arising from the lockdown
measures implemented to contain the spread of Covid-19. Inflationary pressures
edged up in the first half of 2020 as headline inflation increased to 12.56 per cent at
end-June 2020, from 11.98 per cent at end-December 2019. External reserves
declined by US$2.31 billion in the first half of 2020 to US$35.78 billion, while in the
foreign exchange market, the naira opened at N307.00/US$ and closed at
N361.00/US$ during the review period.
The Bank introduced initiatives to ameliorate the impact of Covid-19 on the economy
and foster growth. The initiatives included: the N1.0 trillion credit facility for the
manufacturing sector; the N50.0 billion Targeted Credit Facility for households and
micro, small and medium enterprises; the N100.0 billion credit facility for
pharmaceutical companies; and moratorium and reduction in interest rate from 9.0 to
5.0 per cent on all CBN-related intervention programmes. Also, the Monetary Policy
Committee at its May 2020 meeting reduced the monetary policy rate by 100 basis
points from 13.5 to 12.5 per cent.
Broad money supply, M3, grew by 2.63 per cent at end-June 2020, relative to the level
at end-December 2019. Aggregate credit to the economy increased by 4.74 per cent,
owing to the growth in claims on the private sector. Money market rates traded above
their levels in the preceding half year, while short-term maturities remained dominant
in the credit market. Capital market performance was bearish as the All Share Index
and Market Capitalization decreased, owing largely to the effects of the Covid-19
pandemic.
The banking industry solvency showed improvements with the Capital Adequacy Ratio
rising to 14.96 per cent from 14.57 per cent in the second half of 2019. The industry
FINANCIAL STABILITY REPORT – JUNE 2020

Liquidity Ratio at 40.79 per cent was significantly above the prudential minimum of 30
per cent during the review period.
The economic outlook remains cautiously optimistic, given the various policy
measures in containing the effects of the pandemic and sustaining financial sector
resilience.

FINANCIAL STABILITY REPORT – JUNE 2020

ECONOMIC AND FINANCIAL DEVELOPMENTS
1.1 Global Developments
The global economy witnessed a monumental shock in 2020 with the outbreak of the
coronavirus infection in Wuhan, China in the last quarter of 2019 and its global
unravelling. The virus, termed Covid-19, swiftly diffused worldwide, prompting the
World Health Organization (WHO) to declare the outbreak a pandemic in March 2020.
The pandemic initially manifested as a health crisis, but later triggered an economic
crisis, owing largely to containment measures put in place by various governments.
This led to intensification of existing vulnerabilities caused by the US-China trade war
and Brexit uncertainties, among others.

1.1.1 Output
Global output was projected to contract by 4.9 per cent in 2020 but was expected to
rebound in 2021, growing by 5.4 per cent. The global growth optimism was driven by
the expected return to growth in advanced economies as a result of the unprecedented
fiscal, monetary and regulatory responses to mitigate the ravaging effects of the Covid19 pandemic on households and firms.
In Advanced Economies, output was projected to contract by 8.0 per cent in 2020 and
recover to 4.8 per cent in 2021. Economic activity during the first half of the year
declined, owing to the imposition of lockdowns across countries. As the fear of
contagion continued, the prevailing situation suggested a modest recovery in the
second half of 2020. Nevertheless, growth in the United States was expected to
rebound to 4.5 per cent in 2021, from the contraction of 8.0 per cent in 2020, reflecting
the anticipated return to normal economic activities. Similarly, Japan’s economy was
projected to grow by 2.4 per cent in 2021, in contrast to a decline of 5.8 per cent in
2020.
Growth in the Euro area was projected to contract by 10.2 per cent in 2020, reflecting
a substantial decline from the 1.3 per cent growth recorded in 2019. Specifically,
Germany, France, Italy and the United Kingdom were expected to contract by 7.8,
12.5, 12.8 and 10.2 per cent respectively, in 2020. However, growth in the Euro area
was projected to rebound to 6.0 per cent in 2021.
In the Emerging Market and Developing Economies, growth was expected to contract
by 3.0 per cent in 2020, before rebounding to 5.9 per cent in 2021, largely reflecting
China’s early resumption of economic activities in the first half of 2020. Consequently,
China’s economy was anticipated to grow at 1.0 per cent in 2020 and accelerate to
8.2 per cent in 2021, building on the gains achieved in the first half of 2020. India’s
economy was projected to contract by 4.5 per cent in 2020, before recovering to 6.0
per cent in 2021.
FINANCIAL STABILITY REPORT – JUNE 2020

In the Middle East and Central Asia region, growth was projected to contract by 4.7
per cent in 2020, and rebound to 3.3 per cent in 2021.The contraction in 2020 was
attributed largely to disruptions caused by the pandemic, particularly the significant
decline in oil prices, which impacted major oil exporters in the region. Consequently,
Saudi Arabia’s growth was expected to contract by 6.8 per cent in 2020, and recover
marginally in 2021.
In Sub-Saharan Africa, growth was projected to contract by 3.2 per cent in 2020, while
a rebound of 3.4 per cent was expected in 2021. The projected pick-up was predicated
on the assumption of improved economic activities of the region’s major trading
partners. Nigeria’s growth was estimated to contract by 5.4 per cent in 2020 before
rebounding to 2.6 per cent in 2021. Similarly, South Africa’s output was projected to
contract by 8.0 per cent in 2020 before recovering to 3.5 per cent in 2021.
TABLE 1:1 GLOBAL GROWTH
Region/Country
Year

2020*
2021*
World

Advanced Economies

United States

Euro Area

Japan

United Kingdom

Canada

Emerging Market and Developing
Economies

China

Middle East and Central Asia

India

Saudi Arabia

Sub-Saharan Africa

Nigeria

South Africa

Source: IMF’s World Economic Outlook, June 2020 Update
* Projections
FINANCIAL STABILITY REPORT – JUNE 2020

1.1.2 Inflation
Inflation in advanced economies was projected to remain subdued at 0.5 per cent in
2020, from 1.4 per cent in 2019. The downward pressure on prices was due to weaker
aggregate demand and lower commodity prices.
In the United States, inflation was expected to decline to 0.6 per cent in 2020, from 1.8
per cent in 2019, reflecting a fall in commodity prices and weak global economic
activity. In the United Kingdom, inflation was projected to decline to 1.2 per cent in
2020, from the 1.8 per cent in 2019, driven by the effect of lower oil prices reflected in
energy, transport, housing and utility prices. Similarly, Japan’s inflation was expected
to moderate to 0.2 per cent in 2020, from 0.5 per cent in 2019.
In the Emerging Market and Developing Economies, inflation was projected to
decrease to 4.6 per cent in 2020, from 5.0 per cent in 2019, owing largely to a decline
in utilities, food and transportation prices. In South Africa, inflation was estimated at
2.4 per cent in 2020, a decline from 4.1 per cent in 2019, while India’s inflation was
projected to decline to 3.3 per cent in 2020 from 4.5 per cent in 2019.
In the Middle East and North Africa (MENA) region, a decrease in inflation from 9.0
per cent in 2019 to 8.2 per cent in 2020 was projected, owing to declining prices of
food, beverages, fruits and vegetables.
Inflation in Sub-Saharan Africa was projected at 9.3 per cent in 2020, an increase
above the 8.4 per cent recorded in 2019. In Nigeria, inflation was expected to increase
to 13.4 per cent in 2020, above the 11.4 per cent recorded in 2019, owing to the rising
prices of food, housing, transportation and utilities. Similarly, Ghana’s inflation was
projected to increase to 9.7 per cent in 2020 above the 7.2 per cent recorded in 2019.

TABLE 1:2 GLOBAL INFLATION
Region/Country

2020*
2021*
Advanced Economies

United States

Euro Area

Japan

United Kingdom

Emerging Markets and Developing Economies

India

MENA

Sub-Saharan Africa

Nigeria

South Africa

Ghana

Source: IMF World Economic Outlook April 2020 * Projections
1.1.3 Oil Prices
Oil prices in the first half of 2020 recorded severe decline owing to unprecedented oil
demand shocks arising from the adverse effects of the Covid-19 pandemic.
FINANCIAL STABILITY REPORT – JUNE 2020

Furthermore, significant crude oil surplus and massive selloffs in the global oil markets
contributed in dampening crude oil prices.
Consequently, the OPEC Reference Basket (ORB) value declined by 42.33 per cent
to $38.22 per barrel at end-June 2020, from $66.28 per barrel at end-December 2019.
Similarly, Bonny Light and UK Brent prices fell to $40.23 per barrel and $40.45 per
barrel at end-June 2020, from $70.37 per barrel and $69.00 per barrel at endDecember 2019, respectively.

1.1.4 Food Prices
The Food and Agriculture Organization (FAO) Food Price Index fell by 7.9 points to
93.1 points at end-June 2020, from 101.0 points at end-December 2019, indicating a
downward pressure on the prices of major food-related commodities, attributed to the
adverse impact of the Covid-19 pandemic.
The FAO Cereal Price Index decreased by 0.5 point to 96.7 points at end-June 2020,
from 97.2 points at end-December 2019, following improved production of wheat and
weak demand in rice, sorghum and maize.
The FAO Vegetable Oil Price Index averaged 86.6 points in June 2020, reflecting a
decrease of 14.9 points from the level at end-December 2019, attributed to a decrease
in the quotations for soy and sunflower.
The FAO Dairy Price Index decreased by 5.2 points, from 103.5 points at endDecember 2019 to 98.3 points at end-June 2020. The FAO Meat Price Index averaged
94.8 points at end-June 2020, indicating a decline of 11.07 points relative to the
December 2019 figure. This decline was attributed to higher supply as a result of
increased number of exporting countries.
The FAO Sugar Price Index declined to 74.9 points at end-June 2020, from 83.0 points
at end-December 2019. This was due largely to a surge in supply from Brazil in the
face of weak global demand.


FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 1:3 WORLD FOOD PRICE INDEX1

December
20192
June 2020
Food Price Index

Meat

Dairy

Cereals

Vegetable Oils

Sugar

Source: Food and Agriculture Organization (FAO), June 2020 Update

1.1.5 International Stock Markets
Major stock markets experienced bearish performance, owing to the adverse effects
of the Covid-19 pandemic which slowed down economic activities. Other factors
included: trade tensions between the United States and China; growing private and
public sector debt in advanced and emerging market economies; and indications of
recession in some economies.

In North America, the United States S&P 500, the Canadian S&P/TSX Composite and
the Mexican Bolsa indices decreased by 4.4, 11.1 and 14.1 per cent respectively,
during the review period. In South America, the Brazilian Bovespa Stock, Argentine
Merval and Colombian COLCAP indices also decreased by 15.8, 2.8 and 31.7 per
cent respectively.

In Europe, the FTSE 100, France CAC 40 and the German DAX indices decreased by
14.9, 15.0 and 5.7 per cent respectively, during the review period.
In Asia, Japan’s Nikkei 225, Shanghai Stock Exchange-A and Indian BSE Sensex
indices decreased by 4.0, 2.5 and 14.3 per cent respectively, during the period.

In Africa, Nigeria’s NSE All-Share, South African JSE All-Share, Kenyan Nairobi NSE
20, Egypt Stock Market (EGX 30) and Ghanaian GSE All-Share indices declined by

1 Effective June 2020, the price coverage of the FFPI has been expanded and its base period
revised to averages for the years 2014-2016.


FINANCIAL STABILITY REPORT – JUNE 2020

15.1, 3.5, 24.9, 23.8, and 14.1 per cent respectively, during the review period (Table
1.4).

TABLE 1:4 SELECTED INTERNATIONAL STOCK MARKET INDICES
Selected International Stock Market Indices as at June 30, 2020
Country
Index
31-Dec-19
31-Jan-20
30-Jun-

Dec 31,
2019 -
June
30,

Jan 31,
2020 -
June
30,

%
Change
%
Change
AFRICA


Nigeria
NSE All-Share Index

South
Africa
JSE All-Share Index

Kenya
Nairobi NSE 20 Share
index

Egypt
EGX CASE 30

Ghana
GSE All-Share Index

NORTH
AMERICA


US
S&P 500

Canada
S&P/TSX Composite

Mexico
Bolsa

SOUTH
AMERICA


Brazil
Bovespa Stock

Argentina
Merval

Columbia
COLCAP

EUROPE


UK
FTSE 100

France
CAC 40

Germany
DAX

ASIA


Japan
NIKKEI 225

China
Shanghai SE A

India
BSE Sensex


1.1.6 Foreign Exchange Markets
During the review period, most currencies depreciated against the US dollar.
In Europe, the euro, pound sterling and Russian ruble depreciated against the US
dollar by 0.04, 6.89 and 10.39 per cent respectively, owing to adverse effects of the
Covid-19 pandemic.

FINANCIAL STABILITY REPORT – JUNE 2020

In Asia, the Japanese yen appreciated marginally against the US dollar by 1.63 per
cent as a result of strong export demand. Conversely, the Chinese renminbi
depreciated against the dollar by 1.67 per cent, while the Indian rupee depreciated by
5.76 per cent, as growth slowed in the first half of 2020 following weak domestic
demand.

In North America, the Canadian dollar and the Mexican peso depreciated by 16.61
and 4.73 per cent respectively. In South America, the Argentine peso, Colombia peso
and the Brazilian real depreciated against the US dollar by 14.66, 11.94 and 25.03 per
cent respectively, towing to weak global trade and economic activities.

In Africa, the Nigerian naira depreciated against the US dollar by 14.96 per cent at
end-June 2020. The Ghanaian cedi, Egyptian pound, Kenyan shilling and the South
African rand depreciated against the dollar by 0.70, 0.74, 4.83 and 18.58 per cent
respectively, in the same period, following external shocks associated largely with the
Covid-19 pandemic.

TABLE 1:5 TRENDS IN SELECTED CURRENCIES
Exchange Rates of Selected Countries (Value in local currency to US$)

Currency 31-Dec-19 30-Jun-20
Dec 19 - Jun 20
AFRICA


App/(Dep)%
Nigeria
Naira
307.00
361.00
(14.96)
South Africa
Rand
14.00
17.19
(18.58)
Kenya
Shilling
101.36
106.50
(4.83)
Egypt
Pound
16.04
16.16
(0.74)
Ghana
Cedi
5.75
5.79
(0.70)
NORTH AMERICA
Canada
Dollar
1.30
1.36
(4.73)
Mexico
Peso
18.94
22.71
(16.61)
SOUTH AMERICA
Brazil
Real
4.02
5.36
(25.03)
Argentina
Peso
59.87
70.15
(14.66)
Colombia
Peso
3286.84
3732.61
(11.94)
EUROPE

UK
Pound
0.75
0.81
(6.89)
Euro Area
Euro
0.89
0.89
(0.04)
Russia
Ruble
62.00
69.19
(10.39)
ASIA

Japan
Yen
108.65
106.91
1.63
China
Yuan
6.96
7.08
(1.67)
India
Rupee
71.35
75.64
(5.67)
Source: Bloomberg
FINANCIAL STABILITY REPORT – JUNE 2020

1.1.7 Monetary Policy Rates
In response to the headwinds generated by the Covid-19 pandemic, most monetary
authorities across the globe reduced their policy rates during the review period.
Argentina and Ghana reduced their policy rates by 2.00 and 1.50 percentage points
respectively, while Nigeria and Mauritius reduced their policy rates by 1.00 percentage
point each. Furthermore, the advanced economies recorded a modest cut in their
policy rates, ranging from 0.05 in the Euro zone to 1.00 percentage point in the US.
However, in Sweden, the Riksbank increased its policy rate by 25 basis points.
The policy response of the monetary authorities was aimed at limiting the amplification
of the pandemic-induced shocks in order to avert a deeper contraction in output as
well as reduce vulnerabilities in the financial system.
TABLE 1:6 COMPARATIVE INTEREST RATES OF SELECTED COUNTRIES


Source: Cbrates.Com; Trading Economics


Country
Previous
rate
Current
rate
Date last
changed
Botswana
4.75
4.25
Apr 30, 2020
Ghana

14.5
Mar 18, 2020
Kenya
7.25

Apr 29, 2020
Mauritius
2.85
1.85
Apr 16, 2020
South
Africa
3.75
3.5
July 23, 2020
Nigeria
13.5
12.5
May 28,

Australia
0.5
0.25
Mar 19, 2020
Canada
0.75
0.25
Mar 27, 2020
Euro
zone
0.05

Mar 10. 2016
Hungary
0.75
0.6
Jul 21, 2020
Iceland
1.75

May 20,

Japan

-0.1
Jan 29, 2016
South
Korea
0.75
0.5
May 28,

Mexico

4.5
Aug 13, 2020
New
Zealand

0.25
Mar 16, 2020

Country
Previous
rate
Current
rate
Date last
changed
Norway
0.25

May 07,

Poland
0.5
0.1
May 28,

Sweden
-0.25

Dec 19,

Turkey
8.75
8.25
May 21,

United
States

Mar 15,

United
Kingdom
0.25
0.1
Mar 19,

Switzerland
-0.25
-0.75
Jan 15,

China
4.05
3.85
Apr 20,

Indonesia
4.25

Jul 16,

Russia
4.5
4.25
Jul 24,

Brazil
2.25

Aug 05,

FINANCIAL STABILITY REPORT – JUNE 2020

1.2 Domestic Developments
The Covid-19 pandemic resulted in a lockdown by the Federal Government from
March 30 to May 3, 2020, to contain the spread of the virus. This led to disruption of
economic activities and general slowdown in the performance of key macroeconomic
variables.

1.2.1 Output
Domestic output contracted by 2.18 per cent in the first half of 2020, in contrast to the
growth of 2.42 per cent in the second half of 2019.

FIGURE 1.1 GROSS DOMESTIC PRODUCT (GROWTH %)


Source: National Bureau of Statistics

1.2.1.1 Oil Sector
The oil sector performed poorly on account of weak global and domestic demand, and
low crude oil prices, arising from the impact of the Covid-19 pandemic. Hence, oil GDP
declined to negative 0.80 per cent in the first half of 2020, from 6.43 per cent in the
second half of 2019. However, the percentage share of the oil sector in real GDP rose
to 9.22 per cent in the first half of 2020, compared with 8.51 per cent in the second
half of 2019.


H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
H1 2020
PER CENT
REAL GDP
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 1.2 SHARES OF OIL AND NON-OIL SECTORS IN REAL GDP (%)


Source: National Bureau of Statistics
The non-oil GDP contracted by 2.31 per cent in real terms in the first half of 2020, in
contrast to the growth of 2.06 per cent in the second half of 2019. The percentage
share of the non-oil sector to total GDP declined to 90.78 per cent, from 91.02 per cent
in the first half of 2019.
TABLE 1:7 SECTORAL CONTRIBUTION TO REAL GDP
-Sector
H1 2019
H2 2019
H1 2020
Agriculture
22.34
27.62
23.27
Industry
23.45
21.19
22.78
Services
54.21
51.18
53.95
Source: National Bureau of Statistics

In terms of sectoral contribution, the services sector accounted for the largest share
(53.95 per cent), followed by agriculture (23.27 per cent) and industry (22.78 per cent).
Agriculture sector grew at a slower pace by 1.88 per cent in the first half of 2020,
compared with 2.30 per cent in the second half of 2019. Despite the effect of the
pandemic and other challenges, growth was achieved, hinged on the multiplier effects
of the various intervention programmes of the Bank and exclusion of the sector from
some of the lockdown measures. On the other hand, the Industry and Services sectors
declined by 4.97 and 2.64 per cent in the first half of 2020, from their respective levels
of 2.98 and 2.26 per cent in the second half of 2019. The declines in these sectors
were attributed especially to the restrictions on domestic and international movements.


H2 2018
H1 2019
H2 2019
H1 2020
PEERCENT
Oil
Non-oil
FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 1:8 CHANGES (PER CENT) IN REAL GDP BY SECTOR
Sector
H1 2019
H2 2019
H1 2020
Agriculture
2.45
2.30
1.88
Industry
1.63
2.98
(4.97)
Services
2.17
2.26
(2.64)
Source: National Bureau of Statistics

1.2.2 Inflation
Headline inflation (year-on-year), increased to 12.56 per cent at end-June 2020, from
11.98 per cent at end-December 2019, driven largely by the persistent rise in food
prices, VAT increase and the continued implementation of the land border protection
measures. The All-items Consumer Price Index (CPI) stood at 326.1 in the first half of
2020, compared with 307.5 in the second half of 2019, reflecting a 6.05 per cent
increase.
The 12-month-moving-average headline inflation stood at 11.90 per cent in the first
half of 2020, compared with 11.40 per cent in the preceding half year. Core inflation
stood at 10.13 per cent at end-June 2020, representing a 0.80 percentage point
increase over the level at end-December 2019. Significant increases were recorded in
the prices of food and non-alcoholic beverages, transport, health, and miscellaneous
goods.
Food inflation (year-on-year), which comprised farm produce and processed food,
rose to 15.18 per cent at end-June 2020, compared with 14.67 per cent at endDecember 2019. The increase in food inflation by 0.51 percentage point above the
level in the preceding half year was due largely to the rise in imported food prices and
some farm produce (bread & cereal, potatoes, yam & other tubers, fish, meat, and oil
& fats). Imported food inflation increased to 16.31 per cent at end-June 2020,
compared with 16.04 per cent at end-December 2019.


FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 1.3 INFLATIONARY TREND (YEAR-ON-YEAR)


1.2.2.1 External Reserves
Gross external reserves stood at US$35.78 billion at end-June 2020, a decrease of
US$2.48 billion or 6.45 per cent from US$38.26 billion at end-December 2019. Total
inflow decreased by US$0.99 billion or 3.83 per cent from US$25.83 billion at endDecember 2019 to US$24.84 billion at end-June 2020. Similarly, total outflow
decreased by US$4.45 billion or 14 per cent, from US$31.77 billion at end-December
2019 to US$27.32 billion at end-June 2020.
The CBN, FGN and Federation components of the reserves stood at 84.31, 15.49 and
0.20 per cent respectively. The US$ dominated the reserve currency composition with
82.02 per cent, while 11.15 per cent was held in renminbi, 5.78 per cent in SDR, and
1.05 per cent in other currencies at end-June 2020.

TABLE 1:9 FOREIGN EXCHANGE FLOWS THROUGH THE CBN (US$ MILLION)
Period
Inflow
Outflow
Net flow
H1 – 2020
24,840.24
27,324.79
(2,484.55)
H2 – 2019
25,831.30
31,769.24
(5,937.84)
H1 – 2019
30,819.73
28,846.76
1,972.97


Per cent
Headline (Y-on-Y)
Food (Y-on-Y)
Core (Y-on-Y)
2019-H1
2019-H2
2020-H1
FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 1:10 STRUCTURE OF THE RESERVES
Jun'20
US$ millions
Dec'19
US$ millions % Change
Federation
72.52

77.69
-
Federal Government

Central Bank of Nigeria

Total
35,773.35

38,092.20

6.09
-

FIGURE 1.4 GROSS EXTERNAL RESERVES SHOWING CBN, FGN & FEDERATION
PORTIONS


1.2.3 Fiscal Operations3
Government revenue declined in the first half of 2020, owing to the effects of the Covid19 pandemic. Consequently, provisional Federal Government retained revenue stood
at N1,924.47 billion, reflecting a decrease of 34.0 per cent below its budget
benchmark. The decline was attributed largely to the significant drop of 54.5 per cent
in the share from the FGN Independent Revenue and 8.2 per cent in the Statutory
Federation Account allocation components of FGN retained revenue.
Further analysis of the FGN retained revenue revealed that: Federation Account
contributed N1,308.82 billion or 68.0 per cent; VAT Pool Account, N88.97 billion or 4.6
per cent; Federal Government Independent Revenue, N98.40 billion or 5.1 per cent;

3 Data from January to March 2020 were obtained from OAGF, while those for April to June were CBN staff estimates.
FINANCIAL STABILITY REPORT – JUNE 2020

Share of Exchange Gain, N63.96 billion or 3.3 per cent; Excess Oil, N54.77 billion or
2.9 per cent; and Excess Non-oil, N5.55 billion or 0.3 per cent. Others (including FGN’s
share of Signature Bonus and revenues from Special Accounts) accounted for the
balance of N304.02 billion or 15.8 per cent.
Government expenditure in the first half of 2020 stood at N4,568.13 billion, which was
6.8 per cent below the proportionate budget estimate, but was 1.8 per cent above the
level recorded in the preceding period. The increased expenditure relative to the level
in the preceding half year could be attributed to the accommodation of additional
spending for the purpose of strengthening the healthcare system and mitigating the
impact of the Covid-19 pandemic on the economy. The breakdown showed that
recurrent and capital expenditure accounted for 84.1 and 9.7 per cent respectively,
while transfers accounted for the balance of 6.2 per cent.
Overall, the fiscal operations of the Federal Government in the first half of 2020
resulted in a notional deficit of N2,643.66 billion, as against the budget benchmark of
N2,487.77 billion. The deficit was financed, largely from domestic sources.

FIGURE 1.5 FEDERAL GOVERNMENT FISCAL OPERATIONS (N BILLION)

Source: OAGF & CBN Staff Estimate
The domestic debt stock of the Federal Government at end-June 2020 stood at
N15,455.69 billion, reflecting a 3.6 per cent increase over the N14,272.64 billion at
end-December 2019. At 72.7 per cent, FGN Bonds constituted the largest share of the
total domestic debt stock, while Nigerian Treasury Bills and Promissory Notes
constituted 17.9 and 6.2 per cent respectively. Others were: FGN Sukuk (2.4 per cent);
Nigerian Treasury Bond (0.7 per cent); Green Bond (0.2 per cent); and FGN Savings
Bond (0.1 per cent).

The adverse effect of the Covid-19 pandemic continued to spread across jurisdictions,
including Nigeria affecting economic activities and heightening financial vulnerabilities
and risks through various channels. The Covid-19 pandemic and other events
continue to impact the global economy, financial institutions, markets and
jurisdictions, including Nigeria as crude oil prices slumped at the international markets
and millions of businesses households remained under total or partial lockdown.


2nd Half 2018
Half Year 2019
2nd Half 2019
Half Year 2020
Revenue
Expenditure
Fiscal balance
FINANCIAL STABILITY REPORT – JUNE 2020

These developments resulted in slowed economic activities, low government
revenues, loss of revenues by businesses and households, and thereby heightened
risks to financial stability.
Notwithstanding the above development, the Nigeria banking system remain relatively
stable and resilient during the review period and the Central Bank of Nigeria remains
committed to its mandate of maintaining the safety, soundness and stability of the
system. However, the lockdown measures that were put in place to curtail the spread
of the virus posed challenges to the economy and the resilience of the banking
industry. The CBN introduced various mitigating policy measures to address these
challenges. See Box1:

BOX 1: CBN COUNTER-MEASURES TO MITIGATE THE COVID-19 PANDEMIC
• Extension of one-year moratorium on all principal repayments on CBN intervention
facilities;
• Reduction of interest rate from 9.0 per cent to 5.0 per cent on applicable CBN
intervention facilities;
• Regulatory forbearances to the banking sector, allowing banks leave to consider
temporary and time-limited restructuring of the tenor and loan terms for
businesses and households most affected by the Covid-19 pandemic;
• Approval of a 12-month extension of the timeframe for MFBs to meet the new
minimum regulatory capital requirements for the various classes of MFB licenses;
• Suspension of the sale of foreign currency to Bureaux-De-Change Operators;
• N1.0 trillion credit facility for the manufacturing sector;
• The N50.0 billion Targeted Credit Facility stimulus package disbursed through
NIRSAL MFB to support households and MSMEs that are affected by the
coronavirus pandemic; and
• N100.0 billion credit facility for the pharmaceutical companies.
The CBN provided guideline to the industry in March and May 2020 for the
restructuring of credit facilities impacted by Covid-19 pandemic. The criteria for credits
to be restructured are for facilities with secured acceptable collateral and operating in
sectors in which businesses and cashflows had been adversely impacted by the
pandemic. The guidelines required that banks do not charge restructuring fees and
excluded facilities categorized as lost or expired facilities pending renewals.
Furthermore, it limited the moratorium on principal payment to 12 months whilst
allowing that rescheduled payment do not qualify as default for the purposes of
supervisory reporting. Moratorium period for loans under General Commerce Oil and
Gas (downstream) and General (personal and retail) sectors was limited to 6 months.
Under the guidelines, 41.28 per cent of the industry’s credit had been restructured at
end-June 2020. The Oil and Gas, Manufacturing, General Commerce and Other
sectors accounted for 17.44, 4.77, 3.07 and 16 per cent respectively of the total
restructured facilities.
FINANCIAL STABILITY REPORT – JUNE 2020

The CBN continue to monitor banks NPLs closely against the regulatory maximum of
5 per cent to forestall spikes in NPLs. In addition, the implementation of the Global
Standing Instruction in the banking industry is being considered to enhance
repayments and recoveries in the industry.
BOX 2: ELIGIBILITY CRITERIA FOR CONSIDERING BANKS REQUEST FOR REGULATORY
FORBEARANCE ON A CREDIT IMPACTED BY COVID-19 PANDEMIC
1. All obligors operating in sectors of the economy in which businesses and cash
flows have been adversely impacted by the Covid-19 pandemic shall be eligible.
These include but are not limited to oil and gas, agriculture, manufacturing,
transport,
education,
healthcare,
general
(consumer
and
retail),
real
estate/construction and entertainment and tourism.

2. The CBN may consider other sectors outside of those identified above for grant
of the regulatory forbearance on an exceptional basis.

3. All facilities classified LOST as at December 2019 shall NOT be eligible.

4. All expired facilities pending renewal by banks as at January 31, 2020 shall NOT
be eligible.

5. Restructuring requests may be initiated by either the bank or the customer.
However, where the requests are initiated by the bank on behalf of the customer,
the bank must obtain the customer’s written acceptance of the terms of the
restructured facility within one month of CBN approval. This document shall be
subject to review by examiners during onsite visits. Customers are permitted to
continue to service their obligations under existing terms and conditions where
they choose to do so.

6. Moratorium shall be available for principal and/or interest.

7. The maximum period of moratorium in respect of any restructured facility shall not
exceed 12 months expiring 31st March 2021.

8. Moratorium period for loans under General Commerce, Oil and Gas
(downstream) and General (personal and retail) sectors shall NOT exceed 6
months subject to the condition in 7 above.

9. No restructuring fee shall be charged on any facility being restructured under this
Guideline.

10. The restructuring of payments 9principal and/or interest) under this Guideline,
shall not qualify as a default for the purposes of supervisory reporting.
FINANCIAL STABILITY REPORT – JUNE 2020

11. The regulatory approval of the restructuring shall be on the condition that the
terms may be reviewed should economic conditions improve.

12. Internal approvals should be obtained before presentation to the CBN for
approval. Where this is not practicable, banks will ensure that the necessary
internal approvals are in place within 30 days of receipt of such regulatory
approval.

13. Only facilities secured with acceptable collaterals are eligible for forbearance
under this Guideline. Acceptable collateral includes the following:
a. Cash;
b. Treasury bills and government securities e.g bonds;
c. Quoted equities and other traded securities;
d. Bank guarantees and Receivables of blue-chip companies
e. Residential legal mortgage
f. Commercial legal mortgage
g. All assets debentures & Negative Pledge; and
h. Movable assets.


FINANCIAL STABILITY REPORT – JUNE 2020

DEVELOPMENTS IN THE FINANCIAL SYSTEM
2.1 Monetary and Credit Developments
The effects of the Covid-19 pandemic on the economy were unprecedented and
severe, posing major challenges to monetary policy in the first half of 2020. In
response, the Monetary Policy Committee (MPC), in March and May 2020, took major
decisions to ease financial conditions to boost output. However, broad money supply
(M3) grew modestly by 2.63 per cent at end-June 2020, compared with 6.2 per cent
at end-December 2019.
The modest expansion in broad money supply reflected the significant decline in
liabilities to non-residents in the face of the Covid-19 pandemic uncertainties, resulting
in a 40.64 per cent rise in net foreign assets. Domestic claims grew by 4.74 per cent,
compared with 29.04 per cent at end-December 2019. The sluggish growth in
domestic claims was due largely to the 11.88 per cent decline in net claims on the
Federal Government. Correspondingly, the increase in total monetary liabilities was
due to the 21.88 per cent and 10.88 per cent surge in transferable deposits and ‘other
deposits’ of the Depository Corporations (DCs) respectively.
Narrow money (M1) increased by 16.27 per cent to N12,381.37 billion at end-June
2020, compared with N10,648.47 billion at end-December 2019. The significant
growth of narrow money stock emanated from the uncertainties surrounding the Covid19 pandemic which increased money demand for precautionary and transactionary
purposes.

FIGURE 2.1 TREND IN MONETARY AGGREGATES

Source: CBN

2.1.1 Net Foreign Assets
Net foreign assets of the banking system increased by 40.64 per cent to N8,360.08
billion at end-June 2020, compared with N5,944.46 billion at end-December 2019,


Jun 2018
Dec 2018
Jun 2019
Dec 2019
Jun 2020
Monetary Aggregates (N'B)
M1
M3
COB
TD
FINANCIAL STABILITY REPORT – JUNE 2020

reflecting a decline in liabilities to non-residents. This showed a contribution of 6.93
percentage points to the growth in broad money supply in the first half of 2020.
2.1.2 Aggregate Credit to the Domestic Economy
Domestic claims grew by 4.74 per cent to N38,453.94 billion at end-June 2020,
compared with 29.04 per cent at end-December 2019. The growth was attributed
solely to the 11.04 per cent increase in claims on ‘other sectors’ as net claims on the
Central Government declined by 11.88 per cent. Aggregate credit to the domestic
economy contributed 4.99 percentage points to the overall growth of broad money at
end-June 2020.
FIGURE 2.2 CREDIT TO THE ECONOMY

Source: CBN
2.1.3 Claims on the Central Government
Net claims on the Central Government stood at N8,898.42 billion at end-June 2020,
showing a decline of 11.88 per cent below the level of N10,098.14 billion at endDecember 2019. The decline was due largely to reduction in holdings of Government
treasury bills. Accordingly, the contribution of net claims on Central Government to the
growth of total monetary assets was negative 3.44 percentage points, in contrast to
the positive contribution of 15.83 percentage points at end-December 2019.
2.1.4 Aggregate Claims on Other Sectors
Banking system credit to Other Sectors stood at N29,555.61 billion at end-June 2020,
reflecting an increase of 11.04 per cent over the N26,616.74 billion at end-December
2019. The increase was driven mainly by 21.89 per cent growth in claims on Other
financial corporations and 8.46 per cent increase in claims on the private sector.
Consequently, the contribution of claims on other sectors to the growth of total
monetary assets was 8.43 percentage points, compared with 9.41 percentage points
at end-December 2019.


Jun 18
Dec 18
Jun 19
Dec 19
Jun 20
N Billion
N Billion
Claims on Private Sector (LHS)
Domestic Claims (LHS)
Claims on Central Government (Net) (RHS)
FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 2:1 GROWTH RATES OF MONETARY AGGREGATES
% Change (Over preceding
December)
Jun 18
Dec 18
Jun 19
Dec 19*
Jun 20*
Domestic Claims

Claims
on
Central
Government4 (Net)

Claims on Other Sectors

Foreign Assets (Net)

Other Items (Net)

Money Supply (M1)

Currency Outside Depository
Corporations

Transferable Deposits

Other Deposits

Monetary Liabilities (M2)

Securities
Other
than
Shares

Total Monetary Liabilities
(M3)

Source: CBN*Revised

2.1.5 Consumer Credit
Consumer credit grew by 17.0 per cent to N1,127.10 billion at end-June 2020,
compared with N963.74 billion at end-December 2019. Consumer loans constituted
3.9 per cent of total credit to other sectors in the first half of 2020, compared with 6.32
per cent at the end of the preceding half of 2019. The increase in consumer credit was
attributed to the enhanced compliance with the Loan to Deposit Ratio (LDR) policy in
the review period.


4 Central Government in this context refers to the Federal Government of Nigeria.
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 2.3 CONSUMER CREDIT
Source: CBN

2.1.6 Classification of Private Sector Credit
Private sector credit, at N18,817.90 billion in the first half of 2020, increased by 7.56
per cent, compared with the level at the preceding half year. Industry and Services
sectors accounted for the largest shares of the total credit, with 37.7 and 38.4 per cent
respectively, compared with 37.3 and 37.9 per cent in the second half of 2019.

Agriculture and Construction sectors accounted for 4.8 and 4.6 per cent respectively
at end-June 2020, compared with 4.6 and 4.1 per cent in the preceding half year. The
Government sector accounted for 8.0 per cent at end-June 2020, lower than the 8.8
per cent recorded in the second half of 2019, reflecting the general decline in net
claims on the Central Government by the Other Depository Corporations (ODCs).


Jun 18
Dec 18
Jun 19
Dec 19
Jun 20
Ratio (%)
N Billion
Consumer Credit
Ratio of claims on private sector (rhs)
FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 2:2 SECTORAL DISTRIBUTION OF PRIVATE SECTOR CREDIT
ITEM
Dec-19
Jun-20
Share in
Total %
Change
%
(=N='m)
(=N='m)
Dec-

Jun-

[1] SECTOR

(1) & (2)
[a] Agriculture

[b] Industry

Mining & Quarrying


Manufacturing


Oil & Gas
3,445,088.58
3,615,525.27
52.8

of which Downstream,
Natural
Gas and Crude Oil Refining
3,445,088.58
3,615,525.27


Power and Energy


of which IPP and Power
Generation
373,449.11
395,854.45


[c] Construction

[d] Trade/General Commerce

[e] Government
1,544,724.57
1,503,193.51
8.8

-2.69
[f] Services

Real Estate


Finance, Insurance and Capital
Market
1,326,473.07
1,369,870.23

Education


Oil & Gas


of which Upstream and Oil &
Gas Services
1,189,709.78
1,327,961.05


Power and Energy

of which Power Transmission
and Distribution
298,349.32
317,079.21


Others


of which:


i. General
ii. Information &
Communication


iii. Transportation & Storage


TOTAL CREDIT
17,495,907.94
18,817,903.42

7.56
Source: CBN

2.1.7 Monetary Base
Liquidity injections in the banking system, arising from policy response to the Covid19 pandemic in the review period led to significant increase in the ODCs’ deposits with
the Bank. Liabilities to ODCs at end-June 2020 grew by 75.45 per cent to N10,944.55
billion, compared with N 6,237.97 billion at end-December 2019, which more than
offset the decline of 5.82 per cent in Currency-in-circulation (CIC).
FINANCIAL STABILITY REPORT – JUNE 2020

The liquidity injections led to a 52.58 per cent growth in the monetary base at endJune 2020, compared with 20.90 per cent at end-December 2019. Correspondingly,
the upward movement on the asset side reflected the increases in both foreign and
domestic assets (net) of the CBN. Growth in net foreign assets was due to the decline
in liabilities to non-residents relative to assets, while the growth in net domestic claims
was accounted for mainly by the claims on other sectors of the economy.

FIGURE 2.4 MONETARY BASE AND ITS COMPONENTS


2.1.8 Maturity Structure of Bank Deposits and Credits
Commercial banks’ credits maturing within one year accounted for 69.4 per cent of the
total bank credit at end-June 2020, compared with 51.73 per cent at end-December
2019. The medium-term and long-term maturities stood at 10.4 and 20.2 per cent
respectively, compared with 17.37 and 30.90 per cent at end-December 2019,
indicating the dominance of short-term maturities in the credit market.
FIGURE 2.5 DISTRIBUTION OF BANK LOANS AND ADVANCES BY MATURITY


Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
June-20
NFA

NDA

OIN

MB

N'Billion

Dec 15
Jun 16
Dec 16
Dec 17
Jun 18
Dec 18
Jun 19
Dec-19
Jun-20
Per cent
Short term
Medium-term
Long-Term
FINANCIAL STABILITY REPORT – JUNE 2020

The analysis of banks’ deposit liabilities showed that short-term deposits (of less than
one-year maturity) constituted 87.7 per cent of the total (73.0 per cent had a maturity
of less than 30 days), compared with 90.32 per cent at end-December 2019. Further
analysis showed that the medium and long-term deposits accounted for 4.2 and 8.1
per cent of total deposits at end-June 2020, compared with 4.0 and 5.7 per cent at
end-December 2019, respectively. The preponderance of short-term liabilities remains
a major constraint to holding long-term assets by Depository Corporations.

FIGURE 2.6 MATURITY STRUCTURE OF BANK DEPOSITS

Source: CBN

2.1.9 Market Structure of the Banking Industry
The structure of the Nigerian banking industry showed that the largest bank’s share of
deposits and assets stood at 14.6 and 14.3 per cent at end-June 2020, compared with
14.94 and 13.20 per cent at end-December 2019, respectively. Six banks accounted
for 68.1 and 65.2 per cent of total deposits and assets respectively. The market shares
of the remaining twenty-one banks ranged from 0.1 to 5.1 per cent in deposits and 0.1
to 5.2 per cent in assets, compared with 0.02 to 5.94 per cent and 0.08 to 5.24 per
cent respectively, in the preceding period.
The Herfindahl-Hirschman Indices on a scale of 100 to 10,000 stood at 937.38 in
deposits and 880.47 in assets at end-June 2020, compared with 833.96 and 838.56,
respectively, in the first half of 2019, indicating an increase in concentration ratio in the
review period.


Jun 16
Dec 16
Dec17
Jun18
Dec18
Jun19
Dec19
Jun20
Per cent
Per cent
Short term
Medium-term
Long-Term
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 2.7 CONCENTRATION RATIOS OF THE BANKING INDUSTRY ASSETS AND
DEPOSITS


2.2 Other Financial Institutions
There were 6,333 Other Financial Institutions (OFIs) at end-June 2020, compared with
6,190 institutions at end-December 2019, an increase of 143 OFIs. This was due to
the licensing of 136 Bureaux de Change (BDCs), six (6) Finance Companies (FCs)
and one (1) Microfinance Bank (MFB). There were seven (7) Development Finance
Institutions (DFIs), 912 Microfinance Banks (MFBs), 80 Finance Companies (FCs), 34
Primary Mortgage Banks and 5,300 Bureaux De Change (BDCs) at end-June 2020.

TABLE 2:3 LICENSED OTHER FINANCIAL INSTITUTIONS
S/N
Type
December 31, 2019
June 30, 2020

Microfinance Banks

Bureaux De Change
5,164
5,300

Finance Companies

Development Finance
Institutions

Primary Mortgage Banks

Total
6,190
6,333

Total assets5 of the OFIs increased by 19.4 per cent to N3,802.58 billion at end-June
2020, compared with N3,183.50 billion at end-December 2019. This was attributed
largely to increased placements and investments.


5 excluding the BDCs


Dec 18
Dec 15
Dec 19
Jun 20
HHI
CR
CR(Deposits)
CR( Assets)
CR( Largest-Deposits)
CR (Largest-Assets)
HHI (Deposits) (rhs)
HHI (Assets) (rhs)
FINANCIAL STABILITY REPORT – JUNE 2020

Placements with banks increased by 43.3 per cent to N585.11 billion at end-June
2020, compared with N408.18 billion at end-December 2019, while investments
increased by 55.6 per cent to N904.13 billion. Similarly, shareholders’ funds increased
by 23.21 per cent to N585.58 billion at end-June 2020, compared with N475.27 billion
at end-December 2019. Borrowings also increased by 44.76 per cent from N1,211.65
billion at end-December 2019 to N1,753.98 billion at end-June 2020.The increase was
largely accounted for by the DFIs borrowings which increased by N428.55 billion or
41.75 percent to N1,455.11 billion at end-June 2020, from N1,026.56 billion at endDecember 2019.

2.2.1 Development Finance Institutions
Total assets/liabilities of the seven (7) DFIs increased by 22.3 per cent, to N2,471.00
billion at end-June 2020, compared with N2,021.18 billion, at end-December 2019,
owing, largely, to increases in reserves, deposits, borrowings and long-term liabilities,
as well as increases in investments and other assets by the institutions. The paid-up
capital of the institutions, however, remained unchanged at N238.78 billion.
Investments, other assets and fixed assets increased by 537.68 per cent, 66.90 per
cent and 10.08 per cent respectively, while the net loans and advances decreased by
4.10 per cent to N1,130.89 billion at end-June 2020, from N1,179.28 billion at endDecember 2019.
The shareholders’ funds also increased by 22.3 per cent to N364.10 billion at endJune 2020, from N297.82 billion at end-December 2019. The increase was due mainly
to the accretion in reserves reported by the Bank of Industry (BOI), Development Bank
of Nigeria (DBN), and Nigeria Mortgage Refinance Company (NMRC).
The Bank of Industry, DBN and Federal Mortgage Bank of Nigeria (FMBN) accounted
for 57.01, 19.29 and 14.63 per cent of the total assets of DFIs, while Nigeria Export
Import Bank (NEXIM), NMRC, Bank of Agriculture (BOA) and The Infrastructure Bank
(TIB) accounted for 4.36, 3.02, 1.47 and 0.22 per cent, respectively. The BOI, FMBN,
DBN, NEXIM, NMRC and BOA accounted for 64.12, 21.29, 7.33, 5.37, 1.56, and 0.32
per cent of the total net loans and advances respectively.

2.2.2 Primary Mortgage Banks
The number of licensed PMBs at end-June 2020 remained unchanged, comprising
12 National and 22 State PMBs. The total assets/liabilities of the PMBs increased
marginally by 1.0 per cent to N436.29 billion at end-June 2020, compared with
N432.05 billion at end-December 2019.
Shareholders’ funds fell by 12.3 per cent to N46.65 billion at end-June 2020,
compared with N53.17 billion at end-December 2019. However, loans and advances
increased to N240.45 billion, compared with N238.49 billion at end-December 2019.
Similarly, placements with banks increased to N46.94 billion at end-June 2020,
compared with N40.87 billion at end-December 2019. Non-current assets held for
FINANCIAL STABILITY REPORT – JUNE 2020

sale decreased to N50.02 billion at end-June 2020, compared with N52.59 billion at
end-December 2019.
Investible funds available to the PMBs amounted to N21.04 billion, sourced mainly
from increased other liabilities, deposits, and reduction in non-current assets held for
sale. The funds were invested in placements with banks and quoted shares.

TABLE 2:4 PRIMARY MORTGAGE BANKS FINANCIAL HIGHLIGHTS

End-December 2019
(N’ billion)
End-June 2020
(N’ billion)
%
Change
Total assets
432.05
436.29
0.98
Loans and advances
238.49
240.45
0.82
Placements with banks
40.87
46.94
14.85
Investment
in
Quoted
Shares
9.96
12.49
25.40
Deposit liabilities
143.56
147.98
3.08
Other liabilities
158.96
206.16
29.69
Shareholders’ funds
53.17
46.65
(16.02)

2.2.3 Finance Companies
Total assets/liabilities of FCs increased by 9.9 per cent to N256.62 billion at end-June
2020, compared with N233.42 billion at end-December 2019. The increase was
attributed, largely, to injection of capital by some institutions, accretion to reserves and
increased borrowings. Similarly, loans and advances increased by 16.6 per cent to
N93.44 billion at end-June 2020, compared with N80.13 billion at end-December 2019.
Investments declined by 9.2 per cent to N10.57 billion at end-June 2020, from N11.64
billion at end-December 2019, owing to disposal of investment holdings by the
institutions. Shareholders’ funds, increased by 17.7 per cent to N43.88 billion at endJune 2020, compared with N37.29 billion at end-December 2019. This was as a result
of injection of additional capital and increase in ploughed-back profit in the review
period.
Investible funds available to the FCs in the review period amounted to N29.76 billion,
compared with N65.40 billion at end-December 2019. The funds were sourced, mainly
from borrowings (N16.85 billion), reserves (N5.21 billion) and paid-up capital (N1.38
billion). The funds were utilised, mainly, to increase loans and advances (N13.32
billion), bank balances (N5.31 billion) placements with banks (N2.41 billion) and fixed
assets (N4.40 billion).


FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 2:5 FINANCIAL POSITION OF FINANCE COMPANIES AT END-JUNE 2020


End-Dec

(N’ billion)
End-June

(N’ billion)
Change

(N’ billion)
% Change

Total Assets

Cash in Vault

Balances with
Banks

Loans and
Advances

Investments

Fixed Assets

Borrowings

Shareholder’s
Funds

Paid-up capital

Reserves


2.2.4 Microfinance Banks
The number of MFBs stood at 912 at end-June 2020, compared with 911 at endDecember 2019, comprising 10 National, 135 State and 767 Unit MFBs, compared
with 10 National, 135 State and 766 Unit MFBs at end-December 2019.
Total assets/liabilities of MFBs was N638.67 billion at end-June 2020, compared with
N496.85 billion at end-December 2019. The paid-up capital and shareholders’ funds
increased by 2.65 per cent and 5.20 per cent to N80.89 billion and N130.95 billion at
end-June 2020, compared with N78.80 billion and N113.67 billion at end-December
2019, respectively. This was attributed, mainly, to capital injection and accretion to
reserves from ploughed-back profits.
Similarly, net loans and advances increased by 28.5 per cent to N328.18 billion at endJune 2020, compared with N255.47 billion at end-December 2019. Deposit liabilities
rose by 13.3 per cent to N283.14 billion at end-June 2020, compared with N250.00
billion at end-December 2019. Reserves also increased by 3.6 per cent, to N50.06
billion at end-June 2020, compared with N34.87 billion at end-December 2019.
Overall, the average capital adequacy ratio (CAR) of the sub-sector fell to 23.02 per
cent at end-June 2020, compared with 24.6 per cent at end-December 2019. However,
the average portfolio-at-risk (PAR) decreased to 24.33 per cent at end-June 2020,
compared with 51.7 per cent at end-December 2019, owing largely to regulatory
forbearance for the restructuring of credit facilities for institutions impacted by the
FINANCIAL STABILITY REPORT – JUNE 2020

Covid-19 pandemic. Average liquidity ratio of MFBs rose to 125.4 per cent at end-June
2020, compared with 121.2 per cent at end-December 2019. At that level, liquidity ratio
at end-June 2020 was 105.4 percentage points above the stipulated minimum ratio of
20.0 per cent.
Investible funds available to the sub-sector in the review period amounted to N160.04
billion, compared with N75.70 billion at end-December 2019. The funds were sourced
mainly from increase in deposits, long-term loans, reserves, other liabilities, paid-up
capital, and reduction in short-term investments. The funds were used to increase net
loans and advances, bank placements, bank balances, other assets and reduced
takings from other banks.

TABLE 2:6 FINANCIAL POSITION OF MICROFINANCE BANKS


EndDecember

(N’ billion)
End-June

(N’ billion)
Change
(N’
billion)
%
Change

Total Assets

Cash in Vault

Balances with Banks

Placements
with
Banks

Loans and Advances

Short
Term
Investments

Fixed Assets

Deposits

Shareholders’ Funds

Paid-up capital

Reserves


2.2.4.1 Maturity Structure of Loans & Advances and Deposit Liabilities
Short-term credit remained dominant with MFBs in the review period, driven largely,
by the short-term structure of deposits mobilized by the institutions. Accordingly, at
end-June 2020, short-term loans (with maturities of less than one year), accounted for
71.6 per cent of the aggregate loans and advances, a 9.8 percentage points decrease
from 81.4 per cent recorded at end-December 2019. Loans with long-term maturities
(over 360 days) accounted for 28.4 per cent of the total, compared with 18.6 per cent
at end-December 2019.
FINANCIAL STABILITY REPORT – JUNE 2020

Similarly, analysis of the deposits structure showed that short-term deposit liabilities
(less than one-year maturities) remained dominant, constituting 79.4 per cent of total
deposit liabilities, a 4.6 percentage points decline below 84.0 per cent recorded at endDecember 2019. Deposits with long-term maturities (above 1 year) increased by 4.6
percentage points, accounting for 20.6 per cent of total deposit liabilities at end-June
2020, compared with 16.0 per cent at end-December 2019.

TABLE 2:7 MATURITY STRUCTURE OF LOANS & ADVANCES AND DEPOSIT LIABILITIES

Tenor/Period
December 2019
June 2020
Loans and
Advances
Deposits
Loans and
Advances
Deposits
0-30 Days

31-60 Days

61-90 Days

91-180 Days

181-360 Days

Total Short-Term

Above 360 Days

Total


2.2.4.2 New Capital Regime for MFBs
In consideration of the impact of the Covid-19 pandemic, the Bank revised the earlier
deadlines of April 2020 and April 2021 for the recapitalization of MFBs as stated below:
1. Tier 2 Unit MFB: These are institutions located in the rural, under-banked and
unbanked areas and are now required to have a minimum capital of N35 million
by April 30, 2021 and N50 million by April 30, 2022.
2. Tier 1 Unit MFBs: These are institutions located in urban areas and in state
capitals and are now required to have a minimum capital of N100 million by
April 30, 2021, and N200 million by April 30, 2022.
3. State MFBs – These institutions are now required to have a minimum capital
of N500 million by April 30, 2021, and N1 billion by April 30, 2022.
4. National MFBs – These institutions are now required to have a minimum
capital of N3.5 billion by April 30, 2021, and N5 billion by April 30, 2022.


FINANCIAL STABILITY REPORT – JUNE 2020

2.3 Financial Markets
Activities in the financial markets were influenced largely by the impact of the Covid-
19 pandemic on the economy. The decline in crude oil prices, low accretion to
reserves, and foreign portfolio capital reversals led to increased demand pressure at
the foreign exchange market. In the capital market, investors’ apprehension over the
low level of economic activities also took its toll on equities as the market was bearish.
During the period, the Bank maintained its accommodative policy stance in order to
boost credit flow to critical sectors of the economy and support growth recovery by
reducing the Monetary Policy Rate (MPR) to 12.50 from 13.50 per cent in May 2020.
. In addition, the Bank maintained the asymmetric corridor of +200/-500 basis points
for Standing Lending Facility (SLF) and Standing Deposit Facility (SDF), and the Cash
Reserve Requirement (CRR) and Liquidity Ratio (LR) at 27.50 and 30.00 per cent
respectively. Furthermore, the exchange rate was adjusted to N361/US$ from
N307/US$ and sales of foreign exchange to BDCs was suspended.
2.3.1 The Money Market
Activities in the money market during the review period depicted the varying liquidity
conditions in the banking system. Open Market Operations (OMO), Cash Reserve
Requirement debits and sale of foreign exchange to authorized dealers through the
wholesale and retail secondary market interventions constituted the major withdrawals
from the system.

On January 2, 2020, the open-buy-back (OBB) daily average rate opened at 1.77 per
cent, compared with 8.83 per cent on July 1, 2019. The unsecured inter-bank call daily
weighted average rate opened at 2.18 per cent on January 6, 2020, compared to 10.00
per cent on July 1, 2019. The OBB rates peaked at 25.14 per cent on April 24, 2020,
while the unsecured interbank rate peaked at 18.00 per cent on March 16, 2020 and
thereafter, the OBB moderated to 2.75 per cent on April 30, 2020, while the unsecured
interbank rates moderated to 4.00 per cent on March 25, 2020.

The OBB and unsecured interbank rates declined to 2.34 and 3.00 per cent towards
the end of the review period, on June 3, 2020 and June 4, 2020 respectively. The
rates, in some instances, traded significantly above or below the MPR corridor,
reflecting liquidity conditions during the period (Figure 2.7).

Furthermore, the OBB rate ranged between 1.77 to 25.14 per cent, while the interbank call rate ranged between 2.00 to 18.00 per cent, during the review period,
compared with 2.38 to 28.17 per cent and 2.00 to 25.00 per cent respectively, in the
second half of 2019.
The monthly average OBB and inter-bank call rates closed at 11.31 and 5.75 per cent
at end-June 2020, compared with 3.18 and 3.72 per cent recorded at end-December
2019, owing to lower liquidity conditions occasioned by reduced fiscal activities, and
monetary operations of the Bank.
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 2.8 AVERAGE MONEY MARKET RATES MOVEMENTS JANUARY – JUNE 2020


2.3.1.1 Nigerian Treasury Bills
During the review period, total subscriptions for 91-, 182- and 364- day tenor Nigerian
Treasury Bills (NTBs) stood at N2,904.16 billion, compared with N5,455.24 billion, in
the second half of 2019, indicating a decrease of N2,551.08 billion or 46.76 per cent.
Average marginal rates ranged between 1.0000 - 14.0000 per cent, 1.9400 - 12.0000
per cent and 2.8000 - 15.4875 per cent for the 91-, 182- and 364- day tenors
respectively.
The total NTBs issued and allotted for 91-, 182- and 364-day tenors stood at
N1,515.68 billion in the first half of 2020. This indicated a decrease of N201.09 billion
or 11.71 per cent, compared with N1,716.77 billion recorded in the preceding period.
The decrease was attributed to the fall in NTB rates.
A breakdown of the total allotment indicated that commercial banks (including foreign
investors) took up N978.37 billion or 64.55 per cent, merchant banks N38.88 billion or
2.57 per cent, while mandate and internal funds customers of the Bank took up
N498.44 billion or 32.89 per cent during the review period. Comparatively, in the
second half of 2019, commercial banks (including foreign investors) took up N1,003.05
billion (58.43 per cent), mandate and internal funds customers took up N680.31 billion
(39.63 per cent), while merchant banks accounted for N33.40 billion (1.95 per cent).

An analysis of the outstanding NTBs at end-June 2020 showed that commercial banks
accounted for 21.08 per cent, parastatals 44.67 per cent and merchant banks 33.73
per cent, while mandate and internal funds customers accounted for 0.51 per cent.
2.3.1.2 The Foreign Exchange Market
During the review period, the Bank sustained its various foreign exchange
interventions via the Retail Secondary Market Intervention Sales (SMIS) window for
critical sectors, such as agriculture, airline, petroleum, raw materials and machinery.
Similarly, the Bank continued its supply for invisible trade transactions, such as
personal and business travels, medical bills and school fees. The Small and Medium

January
February
March
April
May
June
Per Cent
Inter-Bank Call (%)
Open-Buy-Back (OBB) (%)
MPR (%)
Call NIBOR (%)
30-day NIBOR
FINANCIAL STABILITY REPORT – JUNE 2020

Enterprises (SMEs), oil companies and the Investors & Exporters’ (I&E) windows also
served to provide easy access to foreign exchange. However, sales to the BDC
segment were suspended on March 27, 2020, owing to Covid-19 global lockdown.
The Bank also continued its active participation at the Naira-Settled OTC Futures
Market, and sustained the Bi-lateral Currency Swap Agreement with the People’s
Bank of China (PBoC) through the CBN renminbi Retail SMIS auctions.

2.3.1.3 Exchange Rate Movements at the Interbank, Investors’ & Exporters’
Window and BDC Segment
At the inter-bank segment of the foreign exchange market, the rate opened at
N307.00/US$ on January 1, 2020 and closed at N361.00/US$ on June 30, 2020. The
depreciation was due to market response to liquidity conditions arising from the
adverse effects of the Covid-19 pandemic.
The rate at the I&E window opened at N364.79 /US$ on January 1, 2020 and closed
at N386.50/US$ on June 30, 2020, reflecting a depreciation of 5.62 per cent. At the
BDC segment, the exchange rate opened at N362.00/US$ on January 1, 2020 and
closed at N455.00/US$ on, June 30, 2020, indicating a depreciation of 20.44 per cent
(Figure 2.8).

FIGURE 2.9 AVERAGE BDC AND I & E RATES, JANUARY – JUNE 2020

2.3.1.4 Foreign Exchange Spot, Forwards and OTC FX Futures Transactions
The total foreign exchange sales by the Bank in the first half of 2020 were
US$10,308.01 million. A breakdown of the total sales indicated that interbank spot
sales amounted to US$1,198.48 million, invisibles US$312.00 million, I&E window
US$5,056.55 million and SMEs US$570.00 million. Inter-bank forwards sales
amounted to US$3,170.97 million. The sum of US$5,425.30 million forward contracts
matured, while US$2,504.62 million was outstanding at end-June 2020. Furthermore,
January
February
March
April
May
June
I & E window

BDC

N/US$
FINANCIAL STABILITY REPORT – JUNE 2020

the Bank purchased US$2,210.63 million, resulting in net sales of US$8,097.37
million.
In the preceding period, the total CBN foreign exchange sales at the inter-bank
segment amounted to US$15,212.14 million, of which spot sales accounted for
US$2,106.03 million and invisibles US$572.40 million. The sum of US$864.00 million
was sold to support SMEs for small scale importation, US$5,491.90 million was sold
at the I&E window, and US$6,177.81 million as inter-bank forward sales. In addition,
the Bank purchased US$1,480.81 million, resulting in net sales of US$13,731.33
million.

The notional amount of the OTC FX Futures contracts executed stood at
US$14,332.53 million. Also, the sum of US$10,832.64 million matured during the
review period, while US$13,167.65 million was outstanding at end-June 2020.
In the second half of 2019, the notional amount of the OTC FX Futures contracts
executed amounted to US$7,039.48 million, while the sum of US$6,696.43 million
matured.

2.3.2 The Capital Market
The Nigerian Stock Exchange (NSE) All Share Index (ASI) and Market Capitalization
(MC) both reflected weak performance during the first half of 2020, compared with the
preceding period of 2019, owing to the effects of the Covid-19 pandemic.

2.3.2.1 The Bond Market
Total bonds outstanding at end-June 2020 stood at N11,350.66 billion, comprising
FGN Bonds (N10,091.87 billion or 88.91%), FGN Sukuk (N200 billion or 1.76%), subnational bonds (N378.99 billion or 3.34%), sub-national Sukuk (N1.37 billion or
0.012%), FGN Green Bonds (N25.69 billion or 0.23%) and corporate bonds (N616.26
billion or 5.43%). The figure of total bonds outstanding at end-June 2020 was 9.19 per
cent higher than the N10, 395.02 billion recorded at end-December 2019 (Table 2.3).

2.3.2.2 FGN Savings Bonds
FGN Savings Bonds (FGNSB) worth ₦2.27 billion were allotted during the review
period, compared with ₦3.01 billion at end-December 2019, indicating a decrease of
₦0.74 billion or 24.58 per cent. The decrease was attributed to fewer savings bonds
issued by the government. The new issues were for 2 and 3 years and the coupon
rates ranged from 4.131 to 7.144 per cent and 5.131 to 8.144 per cent respectively.
The coupon rates in the preceding period were much higher, ranging from 9.09 to
11.24 per cent and 10.09 to 12.24 per cent for the respective tenors. Consequently,
FINANCIAL STABILITY REPORT – JUNE 2020

total value of FGNSB outstanding at end-June 2020 was ₦12.99 billion, compared
with N12.67 billion at end-December 2019 (Table 2.3).

TABLE 2:8 OUTSTANDING BONDS (N’ BILLION)
Bond Type
December

June 2020
% Change
Proportion
of Total
(December
2019)
Proportion of
Total (June
2020)
FGN Bonds

Sub-National
Bonds
278.66
378.99

2.68
3.34
Corporate
Bonds

Sukuk – FGN

Sukuk - SubNational

Green Bonds –
FGN

Green Bonds-
Corporate

FGN Savings
Bonds

Total (N)
10,407.7
11,350.66

Source: FMDQ OTC

For the FGN Bonds, new issues and re-openings of N615.00 billion were auctioned
during the review period, indicating a decrease of 30.90 per cent over the N890.00
billion auctioned in the second half of 2019. Public subscriptions and sales increased
to N2,449.97 billion and N1,308.58 billion in the first half of 2020, compared with
N1,353.78 billion and N1,035.36 billion in the second half respectively. The higher
allotment reflected government’s continued reliance on domestic borrowings to
finance the budget deficit.

The yield curve shifted downwards when compared with the preceding period,
depicting higher demand. (Figure 2.9).
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 2.10 YIELD CURVE FOR NIGERIA

Source: FMDQ-OTC Plc

2.3.2.3 Green Bonds
A total of N25.69 billion FGN Green bonds was outstanding at end- June 2020,
comprising 5- and 7-year instruments issued at coupon rates of 13.4800 per cent in
December 2017 and 14.5000 per cent in June 2019. The Green bonds were issued to
finance sustainable development projects with positive impact on the environment and
the economy (Table 2.3).

2.3.2.4 FGN Sukuk
A total of N162.56 billion was issued during the review period. Consequently, N362.56
billion remained outstanding at end-June 2020. The proceeds were targeted at the
construction and rehabilitation of sections of key economic roads across the six
geopolitical zones (Table 2.3).

2.3.2.5 Sub-National Bonds
Sub-national bonds worth N115.11 billion were issued by two states during the review
period. In addition, twelve states redeemed bonds amounting to N14.78 billion.
Consequently, total outstanding bonds stood at N378.99 billion at end-June 2020,
compared with N278.66 billion at end-December 2019.


Yield %
Time to Maturity
30/06/2020
28/06/2019
31/12/2019
FINANCIAL STABILITY REPORT – JUNE 2020

2.3.2.6 Corporate Bonds
Corporate bonds worth N149.50 billion were issued within the review period,
compared with N45.00 billion issued in the preceding period. In addition, corporate
bonds worth N8.05 billion were redeemed. Consequently, bonds worth N616.26 billion
remained outstanding at end-June 2020, compared with N474.81 billion at endDecember 2019.

2.3.2.7 The Equities Market
The Nigeria Stock Exchange (NSE) All Share Index (ASI) closed at 24,479.22 at endJune 2020, indicating a decrease of 8.80 per cent from the 26,842.07 recorded at endDecember 2019. Market capitalization also closed lower at N12,769.81 billion,
reflecting a decrease of 1.46 per cent from the N12,958.38 billion recorded at the end
of the preceding period.
Foreign portfolio investment (FPI) inflows in the first half of 2020 totalled N129.95
billion, while divestments (outflows) stood at N266.68 billion, reflecting a net FPI
outflow of N136.73 billion. In comparison, inflows in the second half of 2019 amounted
to N204.16 billion, while divestments stood at N265.60 billion, reflecting a net FPI
outflow of N61.44 billion (Table 2.4).
Overall, FPI flows accounted for 39.52 per cent of total equity transactions in the
period, compared to 55.89 per cent recorded in the preceding period. Domestic
transactions accounted for the balance of 60.48 per cent in the equities market,
compared with 44.11 per cent in the preceding period (Table 2.4).
The All Share Index (ASI) opened at 26,867.79 and closed at 24,479.22, reflecting a
decrease of 2,388.57 points or 8.89 per cent. Similarly, the Market Capitalisation (MC)
of equities decreased by N0.20 trillion or 1.54 per cent, to N12.77 trillion at end-June
2020, from N12.97 trillion on January 2, 2020. In the second half of 2019, the ASI
opened at 29,614.61 on July 1, 2019 and closed at 26,842.07 on December 31, 2019,
indicating a decrease of 2,772.54 points or 9.36 per cent. The equities market
capitalisation also decreased by N0.09 trillion or 0.69 per cent, from N13.05 trillion on
July 1, 2019 to N12.96 trillion on December 31, 2019.


FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 2:9 DOMESTIC AND FOREIGN PORTFOLIO PARTICIPATION IN EQUITIES TRADING
Period
Total
Foreig
n
N’Billio
n
%
Forei
gn
Domes
tic
N’Billio
n
%
Domesti
c
Foreign
Inflow
N’Billio
n
Foreig
n
Outflo
w

NSE ASI
Market
Capitalizati
on
H1


H2


H1


H2


2.4 Real Sector Interventions
The Bank sustained its intervention programmes and schemes with the broad
objectives of increasing access to finance, boosting productivity in the real sector of
the economy and employment generation. During the period under review, the Bank
took further intervention measures in response to the Covid-19 pandemic. These
measures included various interventions and stimulus packages to cushion the
adverse effects of the pandemic on businesses and households, as well as enable the
healthcare sector to meet the potential increase in demand for healthcare products
and services.
In addition, the Bank developed frameworks for the implementation of the non-interest
window for eleven (11) development finance programmes and schemes during the
review period.
2.4.1 Agricultural Policy Support
2.4.1.1 Agricultural Credit Guarantee Scheme
In the first half of 2020, a total of 9,641 loans valued ₦1.48 billion were guaranteed,
compared with 16,922 loans, valued ₦2.38 billion in the second half of 2019. Also,
6,089 loans valued ₦1.35 billion were repaid, while 15,212 loans valued ₦2.10 billion
in the second half of 2019.
2.4.1.2 Commercial Agriculture Credit Scheme
The sum of ₦27.09 billion was disbursed to 15 projects in the first half of 2020, showing
an increase of 82.42 per cent, compared with ₦14.85 billion to 12 projects in the
second half of 2019. Similarly, a total of ₦29.04 billion was repaid by 264 projects in
FINANCIAL STABILITY REPORT – JUNE 2020

the review period, reflecting an increase of 122.70 per cent above the ₦13.04 billion
repaid by 135 projects in the second half of 2019.
2.4.1.3 Anchor Borrowers’ Programme
In the review period, ₦149.01 billion was disbursed to 810,583 small-holder farmers
across the country to produce rice, maize, cassava, cotton, ginger, fish, onion, cocoa,
soya beans and sesame. This development indicated an increase of 174.32 per cent
above the ₦54.32 billion, and 32.44 per cent increases recorded in the number of
beneficiaries, compared with 348,719 farmers in the preceding period.
Furthermore, a total of 1,095,891 hectares of land were cultivated, compared with
404,842 hectares in the second half of 2019. Repayments under the Programme
amounted to ₦124.90 billion in the review period, compared with ₦17.24 billion in the
preceding period.
2.4.1.4 Accelerated Agriculture Development Scheme
Under the Scheme, the sum of ₦6.00 billion was disbursed to four (4) state
government-sponsored projects in the review period, compared with the ₦5.98 billion
disbursed to four (4) projects in the second half of 2019. The agricultural commodities
produced by the projects included rice, poultry, cassava, fish, maize and soya beans.
2.4.1.5 Paddy Aggregation Scheme
The sum of ₦3.20 billion was released to three (3) projects in the review period,
compared with the ₦3.50 billion released to 12 projects in the second half of 2019.
The financing enabled small and medium-scale rice millers to procure paddy for allyear round rice production.
There was no repayment during the first half of 2020, compared with the sum of ₦2.08
billion repaid by two (2) projects in the preceding period.
2.4.1.6 Maize Aggregation Scheme
The Scheme serves as a working capital facility to improve access to credit by feed
millers, poultry farmers, confectionery companies, silo and warehouse operators, for
the purchase of home-grown maize. The sum of ₦1.50 billion was released for 3
projects in the first half of 2020, compared to the ₦4.3 billion released to 3 projects in
the second half of 2019.
2.4.1.7 National Food Security Programme
The sum of ₦9.00 billion was disbursed to two (2) projects in the review period,
compared with ₦14.50 billion for three (3) projects in the second half of 2019.
Repayments in the review period was amounted to ₦2.85 billion, compared with the
₦5.55 billion repaid in the preceding period.
FINANCIAL STABILITY REPORT – JUNE 2020

2.4.2 Small and Medium Enterprises & Industrial Policy Support
2.4.2.1 Micro, Small and Medium Enterprises Development Fund
There was no disbursement in the first half of 2020, compared with the ₦2.0 billion
disbursed to one (1) project in the second half of 2019. Repayments during the review
period amounted to ₦4.97 billion, reflecting 135.55 per cent increase, over the total;
amount repaid in the second half of 2019.
2.4.2.2 Agribusiness/ Small and Medium Enterprises Investment Scheme
In the review period, ₦26.62 billion was disbursed to 6,727 projects, compared with
the ₦10.83 billion released to 3,337 projects in the second half of 2019. Disbursements
under the Scheme were made to beneficiaries through NIRSAL Microfinance Bank
Limited. Repayments in the review period amounted to ₦27.16 million, compared with
the ₦2.87 million recorded in the preceding half year.
2.4.3 Real Sector Policy Support
2.4.3.1 Real Sector Support Facility
There was no disbursement in the review period, compared with the ₦6.70 billion
released for one (1) project in the second half of 2019. The sum of ₦4.56 billion was
repaid in the review period, compared with the sum of ₦218.36 million repaid in the
preceding period.
2.4.3.2 RSSF Using Differentiated Cash Reserve Requirements
In the period under review, the sum of ₦137.49 billion was released to 59 projects,
compared with the ₦82.50 billion disbursed to 46 projects in the second half of 2019,
showing an increase of 66.65 and 28.26 per cent respectively. The sum of ₦11.65
billion was repaid in the first half of 2020, while there was no repayment in the
preceding period, as all the loans were under moratorium.
2.4.3.3 CBN-BOI Industrial Facility
The facility was provided to BOI to enhance financing of the industrial sector through
investments in value-adding projects. Cumulative financing remained unchanged at
₦100.00 billion for 60 projects. There was no repayment as all facilities were under
moratorium.
2.4.3.4 Federal Government of Nigeria Special Presidential Fertilizer Initiative
There was no disbursement under this initiative in the first half of 2020. However, the
sum of ₦3.50 billion was repaid during the review period, compared with ₦1.75 billion
repaid in the preceding period.
FINANCIAL STABILITY REPORT – JUNE 2020

2.4.4 Small and Medium Enterprises Credit Guarantee Scheme
There was no activity under the above Scheme in the first half of 2020 while cumulative
guarantees issued remained at ₦4.25 billion for 88 projects.
2.4.4.1 Creative Industry Financing Initiative
In the first half of 2020, the sum of ₦1.10 billion was disbursed to 160 projects,
compared with ₦410.62 million in the second half of 2019. There was no repayment
as all facilities were under moratorium.
2.4.4.2 Targeted Credit Facility
The Targeted Credit Facility (TCF) was introduced in the first half of 2020 to cushion
the impacts of the Covid-19 pandemic on households and businesses in Nigeria, and
is managed by NIRSAL Microfinance Bank Limited. During the period under review,
the sum of ₦44.28 billion was disbursed to 70,953 beneficiaries.
2.4.4.3 Healthcare Sector Intervention Fund
The Intervention was introduced to strengthen the sector’s capacity to meet potential
increase in demand for healthcare products and services, by providing affordable
credit to indigenous pharmaceutical companies and other healthcare value chain
participants. Under the Facility, the sum of ₦20.96 billion was disbursed to 15 projects
in the first half of 2020.
2.4.4.4 Covid-19 Intervention Facility for the Manufacturing Sector
The Intervention was introduced during the review period as a stimulus policy measure
under the Bank’s Real Sector Support Facility (RSSF) to strengthen the manufacturing
sector, by providing finance to boost local manufacturing, as well as to support mass
employment and job retention in the country. In the period under review, the sum of
₦77.41 billion was released to 42 projects.
2.4.4.5 Shared Agent Network Expansion Facility
This is a long-term financing facility designed to enable licensed super agents and
Mobile Money Operators (MMOs) to expand capacity and increase access points
across the country. There was no disbursement in the first half of 2020; However, the
number of agents increased to 334,940, bringing the number of agents to 323 per
100,000 adults in the review period, compared with 229 agents per 100,000 adults at
end-December 2019.
FINANCIAL STABILITY REPORT – JUNE 2020

2.5 Export Policy Support
2.5.1 Non-oil Export Stimulation Facility
The sum of ₦9.00 billion was released to two (2) projects in the first half of 2020,
compared with ₦1.50 billion disbursed to one (1) project in the second half of 2019.
The sum of ₦2.85 billion was repaid in the first half 2020, compared with ₦2.47 billion
in the preceding period.
2.5.2 Export Development Facility
During the review period, no disbursement was made, compared with the sum of
₦9.38 billion disbursed to 28 projects in the second half of 2019.
2.6 Energy Policy Support
2.6.1 Power and Airline Intervention Fund
In the second half of 2020, the sum of ₦2.99 billion was released through the BOI for
two (2) power projects, compared with ₦3.76 billion released in the preceding period.
The sum of ₦6.51 billion was repaid, compared with ₦26.90 billion in the second half
of 2019.
2.6.2 Nigerian Electricity Market Stabilisation Facility
The sum of ₦10.73 billion was repaid in the review period, compared with ₦10.25
billion in the second half of 2019. No disbursement was made during the review period.
2.6.3 Nigeria Bulk Electricity Trading – Payment Assurance Facility
In the first half of 2020, the sum of ₦85.42 billion was disbursed to the Nigeria Bulk
Electricity Trading Plc (NBET) through the Bank of Industry (BOI). This was to ensure
the payment of at least 80 per cent of the invoice amount due to power generating
companies to guarantee sustainable supply of power to the national grid. The above
amount was higher than the ₦62.88 billion disbursed for the same purpose in the
second half of 2019.
2.7 Institutional Support and Financial Inclusion
2.7.1 National Collateral Registry
During the review period, there was increased lending against movable assets offered
as collateral by individuals and MSME borrowers.
A total of 59 financial institutions registered 20,282 financing statements valued
₦263.91 billion, US$163.79 million and €4.78 million, in respect of 26,870 borrowers,
compared with 26,782 financing statements valued ₦125.23 billion, US$29.13 million
and €0.07 million registered in favour of 44,890 borrowers in the second half of 2019.
FINANCIAL STABILITY REPORT – JUNE 2020

In addition, a total of 25,968 searches were conducted on the portal by financial
institutions and public users during the review period.
TABLE 2:10 : NUMBER AND VALUE OF FINANCING STATEMENTS ON THE NATIONAL
COLLATERAL REGISTRY FROM JANUARY TO JUNE 2020
Debtor Type
Number
of
Financing
Statements
Number
of
Borrowers
Currency
Value of Financing
Statements
Individual
19,012
25,440
NGN
67,417,599,781.15
USD
424,500.00
Large
Business

NGN
181,168,870,364.73
USD
136,329,845.51
Medium
Business

NGN
10,017,393,366.42
USD
25,436,737.89
EUR
4,731,411.61
Micro
Business

NGN
593,831,242.80
USD
28,004.00
Small
Business

NGN
4,714,948,052.96
USD
1,576,057.03
EUR
46,480.00
Total
20,282
26,870
NGN
263,912,642,808.06
USD
163,795,144.43
EUR
4,777,891.61

A breakdown of the figures of activities during the review period showed that 43
financial institutions registered a total of 9,185 financing statements in respect of
10,032 women-owned enterprises, representing 45.3 per cent and 37.3 per cent
respectively, of the total number of financing statements and borrowers.
From inception to end-June 2020, a total of 121 financial institutions had registered
97,428 financing statements valued at ₦1,739.2 billion, US$1.3 billion and €0.01
billion. An analysis of the figures indicated that 86 financial institutions registered
36,406 financing statements (37.4 per cent), valued at ₦1.3 billion and US$0.006
billion, in respect of women-owned enterprises.


FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 2.10: NUMBER AND VALUE OF FINANCING STATEMENTS REGISTERED IN RESPECT
TABLE 2:11 NUMBER AND VALUE OF FINANCING STATEMENTS REGISTERED IN RESPECT
OF WOMEN AND WOMEN-OWNED BUSINESSES ON THE NATIONAL COLLATERAL
REGISTRY FROM JANUARY TO JUNE 2020
Debtor Type
Number
of
Financing
Statements
Number
of
Borrowers
Currency
Value of Financing
Statements
Individual
9,019
9,807
NGN
19,594,082,651.66
USD
150,000.00
Large
Business

NGN
237,807,505.26
Medium
Business

NGN
843,915,049.17
USD
135,000.00
Micro
Business

NGN
110,064,683.08
Small
Business

NGN
198,528,505.10
Total
9,185
10,032
NGN
20,984,398,394.27
USD
285,000.00

2.8 Financial Inclusion
2.8.1 National Financial Inclusion Governing Committee Meetings
The National Financial Inclusion Strategy (NFIS) Implementation Committee met
during the review period. Discussions at the meeting focused on multi-sector
responses to Covid-19 pandemic, EFInA impact survey of Covid-19 on financial
inclusion, digital solutions for government social interventions, financial inclusion of
vulnerable segments and financial literacy and enlightenment.
2.8.2 Other Financial Inclusion Activities
During the review period, a draft Framework for advancing women’s financial inclusion
in Nigeria was exposed to stakeholders.

In addition, the Quarterly Household Survey on Financial Inclusion was conducted with
the following key outcomes:
A. Product Indicators:
i.
The proportion of adults who had access to e-Payment products increased
to 40.4 per cent at end-June 2020, from 39.5 per cent at end-December
2019.
FINANCIAL STABILITY REPORT – JUNE 2020

ii.
Savings increased to 41.2 per cent at end-June 2020, from 39.5 per cent
at end-December 2019.
iii.
The proportion of adults who had credit products decreased to 5.1 per cent
at end-June 2020, from 6.2 per cent at end-December 2019.
iv. Insurance and Pension indicators decreased to 1.0 per cent and 8.6 per
cent at end-June 2020, from 2.0 per cent and 8.7 per cent at end December
2019, respectively.
B. Channel Indicators
i.
The number of Agents serving 100,000 adults increased to 323 at end-June
2020, from 229 at end-December 2019.
ii.
The number of commercial bank branches serving 100,000 adults decreased
marginally to 4.5 at end-June 2020, from 5.25 at end-December 2019.
iii.
The number of MFB branches serving 100,000 adults increased to 2.8 at endJune 2020, from 2.06 at end-December 2019.
iv.
The number of ATMs serving 100,000 adults increased to 18.2 at end-June
2020, from 16.92 at end-December 2019.
v.
The number of POS and Agents per 100,000 adults also increased to 202 and
322 at end-June 2020, from 180.4 and 228 at end-December 2019,
respectively.
TABLE 2:12 FINANCIAL INCLUSION PRODUCTS INDICATORS


FINANCIAL STABILITY REPORT – JUNE 2020

REGULATORY AND SUPERVISORY ACTIVITIES
3.1 Financial Soundness Indicators
3.1.1 Asset-Based Indicators
3.1.1.1 Non-Performing Loans to Gross Loans
The quality of banks’ assets deteriorated marginally in the first half of 2020, as the
ratio of non-performing loans (NPLs) to gross loans increased to 6.41 per cent at endJune 2020, from 6.06 per cent at end-December 2019. The decline was largely due to
the impact of the lockdown occasioned by the Covid-19 pandemic on businesses.
FIGURE 3.1 BANKING INDUSTRY NPLS TO GROSS LOANS

3.1.1.2 Core Liquid Assets to Total Assets and Short-term Liabilities
The ratio of core liquid assets to total assets decreased by 4.58 percentage points to
18.19 per cent at end-June 2020, from 22.77 per cent in the second half of 2019.
Similarly, the ratio of core liquid assets to short-term liabilities declined by 7.93
percentage points to 27.39 per cent in the review period, compared with 35.32 per
cent at end-December 2019. The decrease was attributed to banks’ aversion to
government securities owing to their low yields and compliance with the loan-todeposit ratio policy of the Bank.
FIGURE 3.2 BANKING INDUSTRY LIQUIDITY INDICATORS


End Jun. 2019
End Dec. 2019
End Jun. 2020
P
e
r
c
e
n
t
a
g
e
s

End Jun. 2019
End Dec. 2019
End Jun. 2020
P
e
r
c
e
n
t
a
g
e
s
Liquid assets (core) to total assets*
Liquid assets (core) to short-term liabilities*
FINANCIAL STABILITY REPORT – JUNE 2020

3.1.2 Capital-Based Indicators
The ratio of regulatory capital to risk-weighted assets increased by 0.39 percentage
point to 14.96 per cent at end-June 2020, compared with 14.57 per cent at endDecember 2019. Similarly, the ratio of Tier 1 capital to risk-weighted assets increased
by 0.28 percentage point to 13.04 per cent at end-June 2020, from 12.76 per cent at
end-December 2019. The increases reflected the capitalization of retained earnings
by banks.
FIGURE 3.3 BANKING INDUSTRY CAPITAL ADEQUACY INDICATORS


The ratio of non-performing loans net of provisions to capital for the industry declined
to 2.03 per cent at end-June 2020, from 8.70 per cent at end-December 2019. This
was due to increased capital buffers from the monetization of 2019 financial year
earnings. However, the Return on Assets (ROA) remained at 2.51 per cent during the
review period.
3.1.3 Income and Expense Based Indicators
The ratio of interest margin to gross income decreased to 59.05 per cent during the
review period, from 61.66 per cent at end-December 2019. Similarly, the ratio of noninterest expenses to gross income decreased to 58.74 per cent at end-June 2020,
from 64.00 per cent recorded in the preceding half. The ratio of personnel expenses
to non-interest expenses also declined to 31.25 per cent at end-June 2020, from 34.61
per cent at end-December 2019.


End Jun. 2019
End Dec. 2019
End Jun. 2020
Percentages
Regulatory capital to risk-weighted assets*
Regulatory Tier 1 capital to risk-weighted assets*
FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 3:1 SELECTED FINANCIAL SOUNDNESS INDICATORS OF THE NIGERIAN BANKING
INDUSTRY

*FSIs are computed based on IMF guidelines.
**Some indicators for 2018 and 2019 are revised


3.2 The Banking Industry Stress Tests
3.2.1 Solvency Stress Test
3.2.1.1 Baseline Position
The baseline CAR and NPL ratios in the period under review were 14.96 and 6.41 per
cent respectively, while ROA and ROE stood at 0.94 and 14.37 per cent respectively,
at end-June 2020.
TABLE 3:2 BANKING INDUSTRY BASELINE SELECTED KEY INDICATORS

CAR
LR
NPLs
ROA
ROE
Jun 2020 (%)

Dec 2019 (%)

Per
centage
Points Change


End Jun
End Dec
End Jun
End Dec
End Jun
Nonperforming loans to total gross loans *

Liquid assets (core) to total assets*

Liquid assets (core) to short-term liabilities*

Regulatory capital to risk-weighted assets*

Regulatory Tier 1 capital to risk-weighted
assets*

Nonperforming loans net of provisions to
capital *

Return on assets*

Interest margin to gross income*

Noninterest expenses to gross income*

Personnel expenses to noninterest expenses

3. Income and Expense Based Indicators
1. Assets Based Indicators
Indicators
2018**
2019**
2. Capital Based Indicators
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 3.4 BANKING INDUSTRY CAR (PER CENT)


3.2.1.2 Credit Risk
The stress test revealed that the banking industry could withstand a shock of “up to
100 per cent increase” in the industry NPLs as the CAR remained above 10 per cent.
However, the industry was vulnerable to shocks “above 100 per cent increase” in NPLs
as the industry CAR would fall below 10 per cent.

TABLE 3:3 CREDIT DEFAULT SHOCKS


Similarly, the credit concentration stress test showed the resilience of the banking
industry as CAR remained above the 10 per cent regulatory threshold under scenarios
1, 2 and 3 as shown in Table 3.4.


Dec ' 16
Jun ' 17
Dec '17
Jun ' 18
Dec '18
Jun' 19
Dec' 19
Jun' 20
Per cent
Banking Industry CAR
Single Factor Shocks
June 2020
December 2019
Baseline CAR
14.96
14.57
10% NPLs increase
14.53
14.11
15% NPLs increase
14.32
13.89
20% NPLs increase
14.12
13.68
30% NPLs increase
13.71
13.24
50% NPLs increase
12.88
12.35
100% NPLs increase
10.72
10.05
FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 3:4 CREDIT CONCENTRATION RISK

FIGURE 3.5 CREDIT CONCENTRATION RISK


3.2.1.3 Sectoral Credit Concentration Risk
A breakdown of banking industry total credit by sector at end-June 2020 showed that
the oil and gas sector accounted for 25.80; manufacturing, 15.89; government, 7.85;
general, 9.81; general commerce, 6.57; finance and insurance, 5.90; and others, 28.18
per cent.


6 Performing Loans

Baseline
Scenario 1: Five largest
corporate credit facilities
shifted from Sub-standard to
Doubtful (10%)
Scenario 2: Five largest
corporate credit facilities
shifted from Doubtful to Lost
(50%)
Scenario 3: Five largest
corporate credit facilities
shifted from Doubtful to Lost
(100%)

Jun 2020
Dec 2019
Baseline CAR
14.96
14.57
Single Factor Credit Concentration Shocks
Scenario 1
Five largest corporate credit facilities shifted from passthrough6to sub-standard (10%)
14.34
13.99
Scenario 2
Five largest corporate credit facilities shifted from substandard to doubtful (50%)
13.44
13.15
Scenario 3
Five largest corporate credit facilities shifted from
doubtful to lost (100%)
11.90
11.71
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 3.6 SECTORAL CONCENTRATION OF CREDIT


The results of the stress test showed that the banking industry withstood up to 50 per
cent shock to oil and gas exposures as the post-shock CAR stood at 10.31 per cent.

TABLE 3:5 STRESS TEST ON OIL AND GAS EXPOSURES

Industry CAR (%)
Baseline CAR
14.96
30% Default on total exposure to Oil and Gas
14.22
50% Default on total exposure to Oil and Gas
10.31

3.2.1.4 Interest Rate Risk
The stress test on the net interest-sensitive instruments showed that the industry
maintained a stable solvency position to interest rate shock of “up to 1000 basis points
downward shift in yield curve” as the post-shock CAR declined marginally from 14.96
to 13.16 per cent. However, the interest rate shocks had significant adverse impacts
on the ROA and ROE.
FIGURE 3.7 IMPACT OF INTEREST RATE SHOCKS ON CAR


Oil and Gas
Manufacturing
Government
General
Gen Comm
Finance and
Insurance
Others
14.96
14.04
13.16
Baseline CAR
500 bps downward shift in yield
curve
1000 bps downward shift in yield
curve
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 3.8 IMPACT OF INTEREST RATE SHOCKS ON ROA AND ROE


TABLE 3:6 IMPACT OF SELECTED SHOCKS ON CAR, ROA AND ROE

Banking Industry (%)
Baseline ROA
0.94
Baseline ROE
14.37
Impact of Downward Shift in Yield Curve Shocks on CAR

500 bps downward shift in yield curve
14.04
1000 bps downward shift in yield curve
13.16
Impact of Downward Shift in Yield Curve Shocks on ROA

500 bps downward shift in yield curve
0.50
1000 bps downward shift in yield curve
0.05
Impact of Downward Shift in Yield Curve Shocks on ROE

500 bps downward shift in yield curve
7.57
1000 bps downward shift in yield curve
0.77

3.2.2 Liquidity Stress Test7
The stress test results revealed that after a one-day run scenario, the liquidity ratio for
the industry declined to 30.72 per cent from the 40.79 per cent baseline position.
Similarly, under the 5-day and 30-day scenarios, the liquidity ratio for the industry
declined to 12.44 and 7.57 per cent, indicating N 3.08 trillion and N 3.74 trillion liquidity
shortfalls, respectively. However, net liquidity risk is low as banks have high liquidity
buffers in the form of cash reserve requirement (CRR) with the CBN. In the review
period, the banking industry CRR stood at N10.45 trillion, representing an increase of
100.10 per cent from N 5.22 trillion at end-December 2019.


7 Liquidity stress tests were conducted at end-June 2020 using the Implied Cash Flow Analysis (ICFA) and Maturity
Mismatch/Rollover Risk approaches to assess the resilience of individual banks and the banking industry to liquidity and
funding shocks.

Baseline
500 bps downward shift in yield curve
1000 bps downward shift in yield
curve
ROA
ROE
FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 3.9 : INDUSTRY LIQUIDITY RATIOS AT PERIODS 1-5 AND CUMULATIVE 30-DAY
SHOCKS


TABLE 3:7 LIQUIDITY STRESS TEST RESULTS (POST-SHOCK)
Scenario
Banks with
Liquidity Ratios (LR) <
30%
June 2020
Dec 2019
(26 DMBs)
June 2020
(27 DMBs)
LR (%)
Shortfall to 30%
LR threshold
(N’ billion)
Test 1.1: Implied Cash Flow Test
Test
1.1:
Implied
Cash Flow Test
Day 1

30.72
Nil
Day 2

26.47
734.85
Day 3

22.10
1,554.91
Day 4

17.58
2,310.33
Day 5

12.44
3,080.94
Implied
Cash
Flow
Test
(30
Days)

7.57
3,738.70

3.2.3 Maturity Mismatch
The industry baseline assets and liabilities maturity profile at end-June 2020, revealed
that the shorter end of the market (≤90 day bucket) were adequately funded. In the
≤30-day bucket, seven banks were not adequately funded, while in the 31-90 day
bucket, nine banks had funding gaps. However, the cumulative position for the industry
showed an excess of N4.23 trillion assets over liabilities.


Pre-Shock
After Day 1
After Day 2
After Day 3
After Day 4
After Day 5
After cum 30
days
Dec-18
Jun-19
Dec-19
Jun-20
FINANCIAL STABILITY REPORT – JUNE 2020

TABLE 3:8 MATURITY PROFILE OF ASSETS AND LIABILITIES AT END-JUNE 2020
Bucket
Liabilities
Assets
Mismatch
Cumulative
Mismatch
N Billion
≤30 days

31-90 days

91-180 days

181-365 days

1-3 years

>3 years

Total
32,162.92
36,393.79
(4,230.87)


TABLE 3:9 TEST RESULTS FOR SYSTEM-WIDE MATURITY MISMATCH

Test 2A
Descriptive Maturity
Mismatch.
(No consideration of
rollover)
Test 2B
Static Rollover risk
Analysis.
(No possibility to
close liquidity gaps
in other buckets)
Test 2C
Dynamic Rollover risk
test.
(Free assets used to
close liquidity gaps in
other buckets)
N ‘billion
No of
banks
with
mismatch
N ’billion
No of
banks
with
mismatch
N ’billion
No of
banks with
mismatch
≤30 days
9,294.99

4,694.62

(2,228.34)

31-90 days
5,150.25

465.88

(141.74)

91-180days
2,435.91

(1,728.33)

(691.72)

181-365days
1,749.43

(2,298.28)

(963.15)

1-3 Years
1,340.35

(2,874.42)

(1,090.45)

Above 3 years
(1,298.80)

(5,115.97)

(4,150.98)

Total
18,672.13
(6,856.49)
(9,266.38)

Table 3.9 shows that under Test 2A (Descriptive Maturity Mismatch) the banking
industry was adequately funded, while under Test 2B (Static Rollover Risk Analysis)
and 2C (Dynamic Rollover Risk test) the industry had mismatches of N6.86 trillion and
N9.27 trillion, respectively. These indicated increases of N0.3 trillion and N1.14 trillion
FINANCIAL STABILITY REPORT – JUNE 2020

under Test 2B and Test 2C, respectively, relative to the findings at end-December
2019 tests.

3.2.4 Contagion Risk Analysis
Contagion risk analysis showed a 76 per cent increase in exposures and
interconnectedness through interbank placements and takings, compared with the
end-December 2019 position. Two banks were central on the network with a combined
exposure of 65 percent of total interbank takings.
Six banks accounted for N713.00 billion or 79 per cent of total placements and
N820.00 billion or 91 per cent of total takings of which N584.00 billion or 65.00 per
cent was provided by the top four placers of funds.

FIGURE 3.10 NETWORK ANALYSIS BASED ON INTERBANK EXPOSURES


BOX 3: LIQUIDITY STRESS TEST ASSUMPTIONS
Implied Cash Flow Analysis
The Implied Cash Flow Analysis (ICFA) assessed the ability of the banking system
to withstand unanticipated substantial withdrawals of deposits, short-term
wholesale and long-term funding over 5 days and cumulative 30 days, with specific
Node colour representation
Blue
= Lenders,
Deep Blue= Net Placement
Red
= Borrowers
Purple= Net Takings
FINANCIAL STABILITY REPORT – JUNE 2020

assumptions on fire sale of assets. The test assumed gradual average outflows of
3.8, 5.0 and 1.5 per cent of total deposits, short-term funding and long-term funding
respectively, over a 5-day period and a cumulative average outflow of 22.0, 11.0
and 1.5 per cent of total deposits, short-term funding and long-term funding
respectively, on a 30-day balance. It also assumed that the assets in Table 3.10
would remain unencumbered after a fire sale.

The Maturity Mismatch/Rollover Risk
This approach assessed funding maturity mismatch and rollover risk for assets and
liabilities in the 1-30 and 31-90 day buckets, with assumptions of availability of
funding from the CBN and intra-group as described below:

i. Test 2a: Descriptive Maturity Mismatch assumed that the baseline mismatch
remained, but 5 per cent of total deposits would be made available from the CBN
and the intra-group;

ii. Test 2b: Static Rollover Risk assumed that 80.0 and 72.0 per cent of the
funding in the 1-30 and 31-90 day buckets would be rolled over, with no possibility
to close the funding gap from other buckets. However, 5 per cent of the total
deposits would still be available from the CBN and the intra-group; and

iii. Test 2c: Dynamic Rollover Risk made the same assumption as in 2b above,
but with the option of closing the liquidity gap from other buckets.
TABLE 3. 1: PERCENTAGE OF ASSETS UNENCUMBERED AFTER FIRE SALES
Item
No
Assets
%
Unencumbered
1.
Cash and cash equivalents

2.
Current account with CBN

3.
Government bonds, treasury bills and other
assets with 0% risk-weighting
66.5
4.
Certificates of deposit held
66.5
5.
Other short-term investments

6.
Collateralized placements and money at call

7.
CRR

FINANCIAL STABILITY REPORT – JUNE 2020

3.3 Supervision of Banks
3.3.1 Bank Examination
The CBN and the Nigeria Deposit Insurance Corporation (NDIC) conducted the Joint
Risk Asset Assessment (Target) Examination of 26 banks in February 2020. The
examination focused on appraising the quality of the risk assets, determining the
adequacy of loan-loss provisions and ascertaining the reasonableness of banks’
income and expenses. The report showed that banks’ earnings improved as a result
of higher volume of transactions and reduction in impairment charges, among others,
when compared to 2019 results. There were also recoveries on previous delinquent
loans and write-off of fully classified loans. These improvements enhanced the capital
adequacy and other prudential ratios in the industry.
3.3.2 Enhanced Supervision of Domestic Systemically Important Banks
The Domestic Systemically Important Banks (D-SIBs) were routinely subjected to
enhanced supervision in view of the significant impact the distress or failure of any of
the institutions could have on the financial system.

All banks were assessed during the review period, using the indicator-based
measurement approach, to determine the banks that satisfied the essential criteria for
classification as D-SIBs. The D-SIBs accounted for 57.95% (N25.76 trillion) of the
industry total assets of N44.45 trillion. Similarly, they also accounted for 61.30%
(N16.26 trillion) of total industry deposits of N26.53 trillion and 58.71% (N10.89 trillion)
of the aggregate industry credit of N18.56 trillion.

3.3.3 Asset Management Corporation of Nigeria
During the period under review, cash recoveries from asset sales and credit
repayments, stood at N18.86 billion while asset and shares forfeiture stood at N7.83
billion. The total recoveries from inception to June 30, 2020 amounted to N1.05 trillion,
comprising cash of N413.57 billion, asset forfeiture of N274.26 billion, shares forfeiture
of N135.60 billion and claw-back/repurchases of N229.08 billion on defective Eligible
Bank Assets.
The carrying value of AMCON’s liabilities stood at N5.87 trillion at end-June 2020, with
the AMCON Notes of N4.03 trillion and Loan (Debenture) of N500 billion accounting
for 77 per cent of the liabilities.
The carrying value of the Corporation’s assets net of impairment increased marginally
to N1.01 trillion at end-June 2020, from N0.95 trillion at end-December 2019,
representing 17.29 per cent of the liabilities.
Contributions to the Banking Sector Resolution Cost Fund by the stakeholders in the
review period stood at N276.48 billion.
FINANCIAL STABILITY REPORT – JUNE 2020

3.3.4 Cross Border Supervision of Nigerian Banks
3.3.4.1 Foreign Subsidiaries of Nigerian Banks
The number of offshore subsidiaries of Nigerian banks at end-June 2020 remained at
60. However, the number of representative offices reduced to four (4) at end-June
2020, from five (5) at end-December 2019, owing to the closure of a representative
office. The number of affiliates and international branches remained one (1) and two
(2) respectively, bringing the total number of offshore entities to 67.
3.3.4.2 Onsite Examination of Offshore Subsidiaries of Banks
In order to enhance the supervision of cross border entities, the Framework on Cross
Border Supervision was revised to capture the requirements of the Revised Basel
Core Principles for Effective Banking Supervision.
During the period, banks were required to highlight the impact of Covid-19 on their
subsidiaries and the measures taken to mitigate them. In addition, the Guidelines for
Supervisory College in line with the principles and recommendations set out by the
Basel Committee on Banking Supervision and Guidelines for the Assessment of
Country Risk were developed.

3.3.4.3 Supervisory Collaborations
3.3.4.3.1 Community of African Banking Supervisors
During the review period, the following activities were carried out:
a) A three-year (2020-2022) work plan was developed to assess Fintech activities
in the region, provide a framework for crisis management and banking
resolution, as well as build capacity;
b) The work plan of the Community of African Banking Supervisors (CABS) for
2020-2022 was approved by the Association of African Central Banks (AACB);
and
c) A questionnaire for the survey of Fintech penetration and regulation in Africa
was administered to all members of the AACB.
3.3.4.3.2 Technical Assistance
The Bank, during the review period, hosted a team of examiners from the National
Bank of Rwanda on a study tour in line with the CBN’s initiative to build the capacity
of Bank Supervisors in AML controls and harmonize practices in jurisdictions where
Nigerian banks operate.

3.3.4.3.3 College of Supervisors of the West African Monetary Zone
The Bank participated in the 36th meeting of the College of Supervisors of the West
African Monetary Zone (CSWAMZ) in Sierra Leone. The meeting reviewed
FINANCIAL STABILITY REPORT – JUNE 2020

developments in the banking system across the Zone, including status of the
implementations of IFRS, Basel standards and Integrated Regulatory Solution (IRS).

3.3.5 Credit Risk Management System
The CBN Credit Risk Management System (CRMS) database continued to serve as a
veritable source of credit information in the banking industry.
At end-June 2020, the total number of credit facilities on the CRMS database stood at
14,509,251, comprising 13,846,282 individual and 662,969 non-individual borrowers,
reflecting an increase of 35.67 per cent. The total number of facilities with outstanding
balances stood at 1,987,529, comprising 1,893,452 individuals and 94,077 nonindividuals at end-June 2020, indicating a decline of 21.59 per cent from the 2,534,836
recorded at end-December 2019.
The strict enforcement of the CBN Regulatory Guidelines on CRMS has led to
enhanced compliance by banks as reflected in the improved credit records.

TABLE 3:10 CREDIT RISK MANAGEMENT SYSTEM
Borrowers from the Banking Sector (Commercial, Merchant and Non-Interest
Banks)
Description


December

June 2020
Absolute
Change:
Increase/
(decrease)
%
Change

Total No. of Credit/facilities
reported on the CRMS:

Individuals

Non-Individuals

Total No. of Outstanding Credit
facilities on the CRMS:

Individuals

Non-Individuals

* The figures include borrowers with multiple loans and/or credit lines
3.3.6 Credit Bureaux

The capital base of the three (3) bureaux remained above the regulatory minimum
during the period. The bureaux recorded growth in value of credit facilities and number
FINANCIAL STABILITY REPORT – JUNE 2020

of subscribers at end-June 2020, above the levels recorded at end-December 2019,
indicating credit growth in the economy within the period (Table 3.13).

TABLE 3:11 CREDIT BUREAUX RECORDS


3.3.7 Other Developments in the Financial System
3.3.7.1 Nigeria Sustainable Banking Principles
In line with the Nigeria Sustainable Banking Principles (NSBP), the Bank reviewed
reports on implementation progress and engaged banks to improve on gaps and build
employee capacity.

3.3.7.2 Nigeria’s Mutual Evaluation Exercise by the Inter-Governmental Action
Group Against Money Laundering in West Africa
The Inter-governmental Action Group against Money Laundering in West Africa
(GIABA) visited the country as a follow up to the 2019 Mutual Evaluation Exercise
(MEE). This was part of efforts to sustain Nigeria’s status with the Financial Action
Task Force (FATF).
3.3.7.3 AML/CFT Cross Border Examination
During the review period, AML/CFT cross-border examination of a Nigerian bank
subsidiary in Uganda was conducted to assess compliance with the Bank’s AML/CFT
Regulations, 2013, vis-a-vis the host country’s AML/CFT laws and regulations.
3.3.7.4 Automation of AML/CFT Processes - Data Rendition, Validation, Data
Warehouse and Analysis
Following the implementation of AML/CFT Data Rendition and Processing System
(ADRAPS), banks commenced rendition of Foreign Currency Reports (FCR),
Politically-Exposed Persons (PEP) reports and three-tiered KYC returns via ADRAPS
in January 2020.
As at June 30,

As at Dec 31,

As at June 30,

As at Dec 31,

As at June 30,

As at Dec 31,

Number of credit records


Number of subscribers
1,400
1,340

1,126
1,096

Value of Credit Facilities
N37.256 trillion
N22.356 trillion
N29.615 trillion
N28.589 trillion
N27.163 trillion
N19.622 trillion

Number of borrowers

CRC Credit Bureau
CreditRegistry
First Central Credit Bureau
FINANCIAL STABILITY REPORT – JUNE 2020

3.3.7.4.1 IFRS and Basel Standards Implementation
The Bank sustained the monitoring of the implementation of IFRS 9 and 16 on
Financial Instruments, as well as the Basel II & III standards during the review period.
3.3.7.4.2 Corporate Governance Scorecard
During the review period, scorecard assessments were conducted on twenty (20)
banks to ascertain their level of compliance with the CBN Code of Corporate
Governance for Banks and Guidelines for Whistleblowing.
The results of the assessments were as follows: fifteen (15) banks were rated
“Acceptable”, four (4) “Need Improvement”, and one (1) “Weak”. In general, the banks
largely complied with the Code.
3.3.8 Complaints Management and Resolution
During the period under review, the Bank received 2,053 complaints from consumers
of financial services, an increase of 449 or 28 per cent over the 1,604 received in the
second half of 2019. Of this number, 2,011 complaints or 98 per cent were against
Deposit Money Banks while 42 or 2 per cent were against Other Financial Institutions.
The increase was due to the closure of bank branches to customers, as a result of the
Covid-19 pandemic lockdown, necessitating the lodging of formal complaints that
would otherwise have been resolved at banks’ counters, with the Bank.
The complaints received were in various categories such as excess/unauthorized
charges, frauds, guarantees, account management, ATM dispense errors, funds
transfers, amongst others, with electronic products-related complaints recording the
highest number.
A total of 2,201 complaints were resolved or closed in the period under review,
compared with 1,236 resolved or closed in the second half of 2019, showing an
increase of 965 or 78.07 per cent. The increase in the number of resolved cases was
attributed to efforts made by the Bank to enforce compliance.
Total claims during the review period amounted to N13.78 billion and $US28,804.69
while the sums of N2.83 billion and $US9,187.27 were refunded by financial
institutions to customers.


FINANCIAL STABILITY REPORT – JUNE 2020

FIGURE 3.11 NUMBER OF COMPLAINTS RECEIVED (JAN - JUN 2020)


FIGURE 3.12 DISTRIBUTION OF COMPLAINTS RECEIVED (IN PERCENTAGES) IN FIRST
HALF OF 2020

Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Number of Complaints Received

COMPLAINTS CATEGORIES (JAN-JUN 2020)
FINANCIAL STABILITY REPORT – JUNE 2020

3.3.9 Implementation of the National Peer Group Educators Programme
The National Peer Group Educators Programme, a training-of-trainers initiative
implemented by the Bank, was designed to leverage the NYSC scheme to drive
financial education, using the Volunteer Corp Members (VCMs) to conduct financial
literacy sessions for adult Nigerians. A training-of-trainers programme which was
expected to onboard over 13,000 VCMs was rolled out across the country in March
2020.
3.3.10 Financial Literacy E-Learning Platform
The Bank in collaboration with relevant stakeholders developed a financial literacy elearning portal, sabiMONI.org.ng, to digitalize the implementation of financial
education programme and improve financial literacy in Nigeria.
3.3.11 Financial Literacy Campaigns Through Digital Media Channels
During the period under review, the campaign on financial literacy and consumer
education was sustained with more emphasis on the use of digital media channels.
Specifically, issues relating to cybercrime, consumer rights and responsibilities, as well
as the process of lodging complaints were emphasised.
3.3.12 Implementation of the Consumer Protection Regulation
Following the issuance of the Consumer Protection Regulations (CPR) in December
2019, a workshop was conducted in February 2020 to sensitize regulators, DMBs,
consultants, organised consumer groups and professional bodies on the provisions of
the CPR.
3.4 Supervision of Other Financial Institutions
The Bank examined 262 OFIs at end-June 2020, compared with 1,021 at endDecember 2019. The exercise involved the risk-based examination of seven (7) DFIs
and 40 MFBs. It also entailed the AML/CFT RBS examination of 124 BDCs, 33 MFBs
and 18 PMBs, as well as the target examination of 40 MFBs.
3.4.1 Bureaux de Change
The overall Money Laundering/Terrorism Financing (ML/TF) Risk Assessment of the
institutions were “Above Average” for 49 BDCs and “High” for 65. Appropriate
recommendations were made to address the observed lapses.
3.4.2 Microfinance Banks
The examination of 40 MFBs, using the RBS methodology, determined that the capital
rating for 18 MFBs was “Acceptable”, 20 “Needs Improvement”, and two (2), “Weak”.
The earnings rating for eight (8) institutions was “Acceptable”, 21 “Needs
Improvement” and 11 was “Weak”. The composite risk rating for one (1) MFB was
“Moderate”, 17 “Above Average”, and 22 “High”.
FINANCIAL STABILITY REPORT – JUNE 2020

The target examination of another 40 MFBs revealed that 17 MFBs had voluntarily
ceased operation, with their licences being recommended for revocation; while 23
MFBs were given deadlines to address challenges observed in their IT operations.
3.4.3 Development Finance Institutions
The examination of the seven (7) DFIs, using the RBS methodology, revealed that the
Composite Risk Rating of the four (4) institutions was:” High”; one (1) was “Moderate”;
one (1) was “Above Average”; and (one) 1 was “Low”. Further analysis revealed that
four (4) DFIs met the minimum regulatory capital requirement, while the sub-sector’s
average NPL ratio stood at 28.11 per cent.

In compliance with the Prudential Standards, Guidelines and Rating System for African
Development Banks and Finance Institutions, four (4) of the institutions were rated
“Satisfactory”, while three (3) were “Marginal”.


FINANCIAL STABILITY REPORT – JUNE 2020

THE PAYMENTS SYSTEM
4.1 Developments in the Payments System
The Bank continued to implement policies and introduce initiatives with a view to
improving the safety and efficiency of the Nigerian Payments System.
4.1.1 Bank Verification Number Operations and Watch-list
At end–June 2020, BVNs count stood at 43.9 million, reflecting an increase of 8.64
per cent over the 40.44 million BVNs recorded at end-December 2019. The number
of accounts linked with BVNs was 53.7 million out of 79.7 million active customer
accounts while the number of watch-listed BVNs stood at 2,670 at end-June 2020.
4.1.2 Nigeria Electronic Fraud Forum
The activities of the Nigeria electronic Fraud Forum were hampered by the Covid-19
pandemic during the review period. However, the Forum used digital platforms to raise
awareness on measures to reduce the incidence and impact of fraud on both
customers and operators.
4.1.3 Supervision of Payments System Participants
During the review period, the Bank conducted an assessment of 37 payments service
providers and the BVN regulatory compliance of 11 banks and NIBSS, with a view to
ensuring compliance with extant regulations. The exceptions and observations were
communicated to the affected institutions for implementation.
4.1.4 Licensing of Payments System Participants
During the review period, five (5) new licences were issued to one (1) mobile money
operator, one (1) payment solution service provider, one (1) payment terminal service
provider and two (2) super agents, which increased the number of licensed PSPs to
123 at end-June 2020.
TABLE 4:1 LICENSED PAYMENTS SYSTEM PARTICIPANTS
Licence –Type
Number
Dec. 2019
June 2020
Card Schemes

Mobile Money Operators

Payment Solution Service Providers

Payment Terminal Service Providers

Transaction Switching Companies

Third Party Processors

Super Agents

Non-Bank Acquirers

Accredited Cheque Printers

Total

FINANCIAL STABILITY REPORT – JUNE 2020

4.1.5 Revised Nigeria Cheque Standards and Cheque Printers Accreditation
Scheme
In continuation of the implementation of the revised Nigeria Cheque Standards and
Nigeria Cheque Printers Accreditation Scheme, three cheque personalizers were
accredited. However, the implementation of the revised Standards was delayed, owing
to the Covid-9 pandemic. Consequently, the implementation date of the new
Standards was extended from September 1, 2020 to January 1, 2021, with the parallel
run of the old and new cheques extended to end-December 2020.

4.1.6 Payments System Vision 2020
The Bank through the Payments Scheme Boards, Special Interest Working Groups
and Initiative Working Groups:
i.
Issued the “Nigerian Payments System Risk and Information Security
Management Framework” to establish standards for the management of
risks in the payments system; and
ii.
Implemented changes on the RTGS System configuration to accommodate
the following:
a. all schemes/instruments in each of the 4 settlement sessions,
even spacing of the four (4) settlement sessions with the cut-off time for
sessions 1, 2, 3 & 4, amended to 9am, 12 noon, 3pm and 6pm
respectively; and
b. extension of system cut-off time for external users from 4:30pm to 6:30pm.
In addition, the Bank issued a circular reducing the chargeback period for ATM, POS
and web transactions to improve customer confidence in the payments system.

4.2 Payments System Statistics and Trends
4.2.1 Large Value Payments
The volume of inter-bank fund transfers through the CBN Real Time Gross Settlement
(RTGS) system decreased by 80,174 or 15.40 per cent to 440,561 at end-June 2020,
from the 520,735 recorded at end-December 2019. However, the value increased by
N1,842.45 billion or 0.79 per cent to N234,731.91 billion, at end-June 2020, from the
N232,889.46 billion achieved at end-December 2019. The decrease in volume was
attributed to the disruption of economic activities during the period.
4.2.2 Retail Payments


4.2.2.1 Cheque Clearing
The volume and value of cheques cleared decreased to 2,435,898 and N1,610.45
billion at end-June 2020, from the 3,858,700 and N2,210.75 billion recorded at endDecember 2019 respectively. These changes reflected decreases of 36.87 and 27.15
FINANCIAL STABILITY REPORT – JUNE 2020

per cent, in volume and value respectively. The sharp decreases were due to
temporary suspension of cheque clearing from March 30, 2020 to April 27, 2020,
following the Covid-19 pandemic.
4.2.2.2 Electronic Transactions
The volume of electronic transactions rose by 2,761.31 million or 163.41 per cent to
4,451.08 million at end-June 2020, from 1,689.77 million at end-December 2019,
reflecting increased usage of electronic channels. Also, the value of transactions
increased by N241,744.17 billion or 271.23 per cent to N330,873.22 billion at endJune 2020, from N89,129.05 billion at end-December 2019. The significant increase
was due to inclusion of data from USSD, Mobile App, Direct Debit, Automated Clearing
House and Intra-bank payments during the review period.

TABLE 4:2 ELECTRONIC TRANSACTIONS
Payment
Channel
Number of
Terminals
Number of Transactions
%
Change
in
Volume
Value N’ Billion
%
Change
(Value)
Dec
Jun
Dec-2019
Jun-2020
Dec-2019
Jun-2020

ATMs


8,600.10
162.66
POS


2,003.23
10.00
Mobile Money


5,146.80
65.21
Online
Transfers
(Internet/Web


80,918.52

171,197.08
111.57
Mobile App


173,493,162


13,525.59

USSD


202,857,969


2069.93

Direct Debit


1,194,030


1,301.08

ACH


97,718,282


127,029.41

Total


1,689,770,459
4,451,083,679

89,129.05
330,873.22


FINANCIAL STABILITY REPORT – JUNE 2020

Key Risks to the Financial System
5.1 Credit Risk


Risk Rating (Medium Risk, Trending up)
Total NPLs increased to N1,212.3 billion at end-June 2020, from N1,064.1 billion at
end-December 2019; similarly the NPL ratio rose from 6.10 to 6.41 per cent. The rise
in NPL ratio reflected the disruptions in economic activities of households and
businesses during the review period, which led to increased non-repayment by
obligors.
To address challenges in the credit market, the Bank introduced stimulus packages
targeted at businesses and households, granted eligible financial institutions
forbearance to restructure credit facilities in specific sectors that were adversely
affected by the Covid-19 pandemic and reduced interest rates on applicable CBN
intervention facilities (see box 1).

FIGURE 5.1 NON-PERFORMING LOANS RATIO


5.2 Liquidity Risk
Risk Rating (Medium Risk, Stable)
The average liquidity ratio of the banking industry declined to 40.79 per cent at endJune 2020, from 45.55 per cent at end-December 2019. This ratio, however, remained
above the regulatory threshold of 30 per cent, reflecting banks' continued preference
for holding liquid assets.


Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
FINANCIAL STABILITY REPORT – JUNE 2020

5.3 Market Risk
Risk Rating (Medium Risk, Trending Up)
The weighted average of OBB and interbank call rates increased to 11.31 and 5.75
per cent at end-June 2020, from 3.18 and 3.72 per cent at end-December 2019,
respectively, reflecting banks’ preference to hold cash in view of Covid-19
uncertainties. Conversely, average savings rate declined to 3.78 from 3.89 per cent
during the same period, a situation which has the potential to discourage savings.
During the review period, foreign exchange rates were adjusted following the adverse
impact of the Covid-19 pandemic. In order to mitigate the volatility in the exchange
rate market, the Bank adjusted the interbank rate and temporarily suspended foreign
exchange sales to BDCs.
In the equities market, the NSE ASI closed at 24,479.22 points at end-June, 2020,
from 26,842.07 points at end-December 2019, despite recording a dip to as low as
18,384.18 points on March 13, 2020. Market activity reflected increased sell-off by
international investors but was moderated by renewed participation by domestic
investors.
Overall, market risk was expected to trend upwards in the second half of 2020 because
of the lingering impact of the Covid-19 pandemic, oil price shocks and FPI reversals.

5.4 Operational Risk
Risk Rating (High Risk, Trending up)
During the review period, reported cases of fraud and forgeries in DMBs increased to
44,948 at end-June 2020, from 33,415 at end-December 2019 and actual losses were
N1.05 billion at end-June 2020. Frauds were carried out through suppression of
cheques, conversion of customers’ deposits, unauthorised fund transfers and ATM
withdrawals.
The increased use of electronic channels for the conduct of transactions following the
Covid-19 pandemic precipitated a rise in cyber-attacks. To address this risk, banks
and payment service providers were directed to ensure full compliance with the
requirements of the CBN Cyber-Security Framework and Guidelines, and the
Framework for the use of Unstructured Supplementary Service Data (USSD) for
Financial Services in Nigeria. In addition, advisories were issued on Advanced
Persistent Threats; Malware/Ransomware Attacks; North Korea Malware and Threat
to Financial Service Sector; Threatened Shutdown of Nigerian Banks by Powerful
Greek Army; and Third-party risks.
Furthermore, during the review period, customers were continually sensitized on the
need to employ safe banking practices while banks were advised to reinforce their
FINANCIAL STABILITY REPORT – JUNE 2020

Disaster Recovery and Business Continuity plans, carry out comprehensive
infrastructure risk assessments and train staff on security awareness.
In the second half of 2020, the risk of attacks on payments system infrastructure and
social engineering was projected to remain elevated as digitized financial services
were rapidly adopted.

5.5 Macroeconomic Risk
Risk Rating (High Risk, Stable)
During the period under review, macroeconomic risk was largely driven by the Covid19 pandemic lockdown measures and investor apprehension. Other risks to the
domestic economy included: threat to fiscal sustainability resulting from dwindling
revenues; inflationary pressures; increased domestic borrowing by the Federal
Government and the disruption to global and domestic supply chains.
To mitigate the impact of the pandemic, the government responded through the
following measures:
o Establishment of a N500 billion Covid-9 Crisis Intervention fund to upgrade
health facilities and fund special public works programme to create
employment;
o Value-Added-Tax exemptions for basic food, pharmaceutical and medical
items;
o Direct distribution of food and cash to the most vulnerable groups in the society;
o Interest holidays for targeted groups; and the
o Securing a US$3.4 billion emergency financial assistance from the International
Monetary Fund.
The combined monetary and fiscal policy measures are expected to moderate the
adverse impacts of the Covid-19 pandemic and facilitate economic growth in the
second half of the year. However, while a rebound in economic activities is expected
with the gradual reopening of the economy, significant domestic and global
macroeconomic risks remain.


FINANCIAL STABILITY REPORT – JUNE 2020

OUTLOOK
Global growth in 2020 was anticipated to contract by 4.9 per cent in view of the
lingering effects of the Covid-19 pandemic. However, a rebound of 5.4 per cent in 2021
was expected, largely from the combined fiscal and monetary responses to mitigate
the impact of the pandemic. Growth optimism for 2021 is reinforced by positive news
on the recent vaccine rollout and increasing world-wide deployment.
Growth in advanced economies was projected at -8.0 per cent in 2020 but was
expected to recover by 4.8 per cent in 2021. Similarly, growth in the EMDEs and SSA
regions was estimated to contract by 3.0 and 3.2 per cent respectively, in 2020, with
anticipated recovery of 5.9 and 3.4 per cent respectively, in 2021. Nigeria’s growth,
projected to contract by 5.4 per cent in 2020, was also expected to recover to 2.6 per
cent in 2021.
Inflation in advanced economies was projected to decline to 0.5 per cent in 2020 and
rise to 1.5 per cent in 2021, owing to the projected increase in consumption
expenditure as the ravaging effects of the Covid-19 pandemic diminished. However,
inflation in EMDE and SSA regions projected at 4.6 and 9.3 per cent in 2020, was
expected to moderate to 4.5 and 7.6 per cent in 2021 respectively.
The projected growth for the economy remained subdued, given declining government
revenue, FPI reversals and other macroeconomic uncertainties. However, the
combined impact of accommodative monetary and fiscal policies as well as the
gradual re-opening of the economy is expected to enable a rebound in economic
activities.
To enhance the efficiency and safety of the Nigerian Payments System, a framework
for next generation payments architecture is being developed. In addition, the Bank
would intensify collaboration with the Nigerian Communication Commission (NCC) to
fast-track the adoption of mobile payments in Nigeria.
In conclusion, the Bank will continue to strengthen its regulatory and supervisory
oversight to enhance the resilience of the banking industry.


FINANCIAL STABILITY REPORT – JUNE 2020

ACKNOWLEDGEMENTS
LIST OF MAJOR CONTRIBUTORS

V.O. Ururuka (PhD.)
Financial Policy and Regulation Department

I. S. Tukur
Ditto

J. M. Gana
Ditto

H. J. Audu
Ditto

J. A. Mohammed
Ditto

Y. Babade
Ditto

U. Babale
Ditto

V. K. Johnson
Ditto

O. I. Adebowale
Development Finance Department

U. B. Ndako
Monetary Policy Department

Chioma Nwosu
Research Department

A. Shebe
Banking Supervision Department

Audu Salihu
Statistics Department

E. O. Shonibare (Mrs)
Risk Management Department

M. Ashiru
Financial Markets Department

V. A. Martins
Other
Financial
Institutions
Supervision
Department

M. M. Farouk
Reserve Management Department

M. K. Muazu
Consumer Protection Department

H. Abdullahi
Banking Services Department

A. A. Isa-Olatinwo
Payments System Management Department

The Report is produced and supervised by the Financial Policy and Regulation
Department

KEVIN N. AMUGO
Director, Financial Policy and Regulation Department