FINANCIAL STABILITY REPORT – JUNE 2021

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FINANCIAL
STABILITY
REPORT


JUNE 2021

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CONTENTS


FINANCIAL STABILITY REPORT – JUNE 2021


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Potential Risks to Stability from the developments in the Financial Markets


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Nigeria Cheque Standards and Cheque Printers Accreditation Scheme 66


5.1
5.2
5.3
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5.4
5.5
5.6


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LIST OF FIGURES
FIGURE 2.1 CONCENTRATION RATIOS OF THE BANKING INDUSTRY ASSETS AND
FIGURE 3.10: INDUSTRY LIQUIDITY RATIOS AT PERIODS 1-5 AND CUMULATIVE 30-DAY
FIGURE 3.13 NUMBER AND PERCENTAGE OF COMPLAINTS BY CATEGORY (JAN – JUN
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LIST OF TABLES
TABLE 1:6 EXCHANGE RATES OF SELECTED COUNTRIES (VALUE IN LOCAL CURRENCY
TABLE 2:7 MATURITY STRUCTURE OF LOANS AND ADVANCES AND DEPOSIT
TABLE 2:8 FOREIGN EXCHANGE SALES AND PURCHASES AT THE INTERBANK
TABLE 2:10 NUMBER AND VALUE OF FINANCING STATEMENTS ON THE NATIONAL
TABLE 2:11 NUMBER AND VALUE OF FINANCING STATEMENTS REGISTERED IN
RESPECT OF WOMEN AND WOMEN-OWNED BUSINESSES ON THE NATIONAL
TABLE 3:1 SELECTED FINANCIAL SOUNDNESS INDICATORS OF THE NIGERIAN
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TABLE 3:12 EXAMINATION OF SYSTEMICALLY IMPORTANT OTHER FINANCIAL


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LIST OF BOXES
BOX 1: CBN COUNTER-MEASURES TO MITIGATE THE COVID-19 PANDEMIC.31


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LIST OF ACRONYMS
AMCON
Asset Management Corporation of Nigeria
AML/CFT
Anti-Money Laundering and Combating the Financing of Terrorism
BDCs
Bureaux de Change
BOA
Bank of Agriculture
BOI
Bank of Industry
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
DVP
Delivery Versus Payment
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
GDP
Gross Domestic Product
GSE
Ghanaian Stock Exchange
HHI
Herfindahl-Hirschman Index
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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
MSMEs
Micro, Small and Medium Enterprises
MHSs
Money Holding Sectors
MICEX
Moscow Interbank Currency Exchange
MoUs
Memoranda of Understanding
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 20
Nairobi Stock Exchange 20-Share Index
NSE ASI
Nigerian Stock Exchange All-Share Index
NYMEX
New York Mercantile Exchange
OBB
Open Buy Back
ODCs
Other Depository Corporations
OFIs
Other Financial Institutions
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
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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


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GOVERNOR’S STATEMENT
This edition of the Financial Stability Report highlights developments in the financial
system in the first half of 2021, amidst the lingering effects of the COVID-19 pandemic.
During the review period, downside risks to economic growth and financial stability
shaped global economic outlook and activities. Global output was projected by the IMF
to grow by 6.0 per cent in 2021, in contrast to the contraction of 3.2 per cent in 2020.
The growth is expected to be moderated by in most Emerging Markets and Developing
Economies (EMDEs) by slower-than-expected rollout of vaccines, elevated inflation
induced by high food prices and tight financial conditions.
Output in 2021 was projected to expand by 7.0, 4.6 and 6.3 per cent in the USA, Euro
Area and EMDEs, respectively. Similarly, economies in Sub-Saharan Africa (SSA) were
expected to expand on the back of gradual progress in the distribution and
administration of COVID-19 vaccines and other regulatory interventions.
In Nigeria, output was projected to grow by 2.5 per cent in 2021, indicating an improved
performance from negative 1.8 per cent in 2020. The growth prospect was premised on
the anticipated improvement in vaccine deployments, targeted policy support, a resilient
financial system and increased investors’ confidence. Generally, credit to the private
sector grew during the period, reflecting the effort of the Bank through its various
interventions towards reviving the economy. The intervention programmes focused on
supporting priority sectors of the economy affected by the COVID-19 pandemic. The
Bank’s development finance interventions increased credit flow to the real sector, while
the foreign exchange intervention eased pressure in the market.
However, the lingering security challenges may slow-down economic activities,
heighten food insecurity and weaken investors’ confidence.
Notwithstanding the security challenges, the banking system remained resilient, as
reflected in the financial soundness indicators. The Bank will continue to sustain its
supervisory and surveillance activities with a view to promoting a sound, stable and safe
banking system in Nigeria.

Godwin I. Emefiele, CON
Governor, Central Bank of Nigeria


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FOREWORD
The global sustenance of fiscal and monetary responses to the COVID-19 Pandemic
and the massive roll out of vaccines planned for the second half of 2021, is expected to
mitigate the adverse effects of the pandemic on households and businesses. These
responses are expected to spur global growth in 2021 and 2022. However, rising global
debts could dampen investors’ confidence. Nigeria recorded improved economic
activities following the easing of COVID-19 containment measures supported by the
Bank’s accommodative monetary policy stance and sustained interventions in targeted
sectors.
The financial soundness indicators of the banking industry remained above prudential
requirements with the results of the stress test further demonstrating the resilience and
soundness of the system.
This edition of the Financial Stability Report is divided into six sections. The first section
examines global and domestic trends. Section two discusses financial system
developments, while the third highlights key stability issues as well as regulatory and
supervisory activities. Section four discusses key developments in the payments
system, while sections five and six focus on key risks and the outlook for financial
stability.
This Financial Stability Report provides insights to the financial conditions, risks and
vulnerabilities as well as the Bank's continuous efforts at promoting a safe and resilient
financial system that supports sustainable economic growth and development.
The public is assured of the Bank’s commitment at ensuring a healthy banking system
that supports sustainable, economic development and inclusive growth.

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


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EXECUTIVE SUMMARY
Global economic activity rebounded in the first half of 2021, due largely to the improved
vaccination coverage, sustained policy support, and a favourable financial environment.
Accordingly, global output was projected to rebound by 6.00 per cent in 2021 and
moderate to 4.90 per cent in 2022, with uneven and limited access to vaccines, the
emergence of new variants of the virus identified as growth inhibitors.
Global consumer prices trended upward in most economies during the review period,
owing mainly to supply side constraints and increases in the prices of commodities such
as food, energy and inputs. These contributed to the mixed performance in the global
stock markets despite the improved market sentiments.

On the domestic front, economic activities continued their gradual recovery following
improvement in the administration of COVID-19 vaccines, sustained fiscal and monetary
policy support as well as the resilient operation of the financial system.

The Gross Domestic Product, grew by 5.10 per cent in the second quarter of 2021, was
constrained by the spread of the mutating strains of the virus, exchange rate pressure
as well as structural rigidities.
Inflationary pressures, driven largely by supply side constraints, exchange rate passthrough and high prices of food and energy persisted in the review period. Appropriate
measures, including sustained monetary operations and foreign exchange
interventions, were implemented to moderate prices in the near-to-medium term.
Several supervisory measures including the introduction of virtual bank examination,
consolidated supervision, and sustained implementation of the Global Standing
Instruction (GSI) policy to mitigate credit risk were implemented by the Bank to promote
the soundness and stability of the banking system.
The measures adopted by the Bank have continued to improve the quality of banks’
assets, as evidenced by the improved Financial Soundness Indicators (FSIs). The ratio
of non-performing loans (NPLs) to gross loans decreased to 5.70 per cent, at end-June
2021, from 6.02 per cent at end-December 2020. Similarly, the CAR of the banking
industry increased by 0.04 percentage point to 15.46 per cent, at end-June 2021, from
14.83 per cent, at end-December 2020. In addition, the CAR of all the D-SIBs remained
above the minimum regulatory requirement of 15 per cent.
The Credit Risk Management System (CRMS) database, a veritable source of credit
information in the banking industry, showed that the total number of credit facilities on
the database increased by 21.63 per cent during the review period, compared with the
preceding period.
During the review period, households and businesses that were adversely impacted by
the COVID-19 pandemic benefitted from the Bank’s development finance interventions
through the Anchor Borrowers’ Programme, Agri/Business Small and Medium
Enterprise Investment Scheme, Healthcare Sector Intervention Facility and Targeted
Credit Facility, amongst others.
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The key risks to financial system stability during the review period included, cyber-risk
from increased use of digital financial services; operational risk from security threats to
the financial system; macroeconomic risk from fragile growth, elevated inflation and
exchange rate pressures. Consequently, the Bank implemented proactive measures to
mitigate the identified risks.
The overall economic outlook remained cautiously optimistic, given the robust policy
measures adopted by the Bank towards mitigating the adverse impact of the pandemic
and enhancing the resilience of the financial system.


FINANCIAL STABILITY REPORT – JUNE 2021

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1 ECONOMIC AND FINANCIAL DEVELOPMENTS
1.1 Global Developments
1.1.1 Output
Global economic activity regained momentum in the first half of 2021, due largely to the
improved pace of vaccine roll out and sustained policy support by various governments.
However, economic recovery was largely divergent across countries, reflecting uneven
distribution and access to COVID-19 vaccines. Most emerging markets and developing
economies (EMDEs) recorded slow recovery resulting from limited access to vaccines,
alongside surges in the number of infections traceable to new virus mutations and the
associated containment measures.
Global output was projected to rebound by 6.00 per cent in 2021 and moderate to 4.90
per cent in 2022. The strong growth optimism was premised on the anticipated
additional fiscal support in some large economies as well as, the planned massive roll
out of vaccines in the second half of 2021.
In advanced economies, output was expected to grow by 5.6 per cent in 2021 and
moderate to 4.4 per cent in 2022. The improved pace of vaccination, especially for the
vulnerable groups in the first half of 2021, has boosted contact-intensive economic
activities, leading to a pickup in aggregate demand. Output in the United States was
projected to grow by 7.0 per cent in 2021, and moderate to 4.9 per cent in 2022, owing
not only to the above development but also to the positive impact of the anticipated
legislation that would boost spending in infrastructure and social safety programmes in
the second half of 2021.
Japan’s economy was also expected to rebound by 2.8 per cent in 2021 and increase
to 3.0 per cent in 2022, as vaccinations proceed rapidly, leading to a full re-opening of
the economy. Similar gains in momentum are expected in the UK and Canada, which
could lead to improved growth later in the year, with a likely spill-over to 2022.

Output in the Euro Area was projected to grow by 4.6 per cent in 2021, and moderate
to 4.3 per cent in 2022. This development was due to the slow pace of recovery as well
as the surge in infections in most of the European countries.

Growth in EMDEs was expected to rebound by 6.3 and 5.2 per cent in 2021 and 2022
respectively. Apart from China, which has an effective public investment plan and
adequate containment measures, most other countries within the EMDEs would be
affected by vaccine procurement challenges, which may precipitate further lockdowns
in 2021 and 2022.

In the Middle East and Central Asia, growth was expected to expand by 4.0 per cent in
2021 and moderate to 3.7 per cent in 2022. This would majorly be driven by envisaged
improvement in economic activities in some countries within the region, but partially
offset by subdued oil production in Saudi Arabia.
FINANCIAL STABILITY REPORT – JUNE 2021

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Growth in Sub-Saharan Africa was projected to expand by 3.4 per cent in 2021, with a
further increase to 4.1 per cent in 2022. The expected pick-up was premised on the
programmed rapid progress in vaccine distribution, alongside sustained support for
private sector investment.
iIIi[In Nigeria, output was projected to grow by 2.5 per cent in 2021 and further by 2.6 per
cent in 2022, driven largely by expected increase in vaccine deployments and targeted
policy support. Similarly, South Africa’s output is expected to grow by 4.0 per cent in
2021 and moderate to 2.2 per cent in 2022.

TABLE 1:1 GLOBAL GROWTH
Region/Country
Year

2021*
2022*
World

Advanced Economies

United States

Euro Area

Japan

United Kingdom

Canada

Emerging Markets and Developing Economies

China

Middle East and Central Asia

India

Saudi Arabia

Sub-Saharan Africa

Nigeria

South Africa

Source: IMF’s World Economic Outlook, July Update, 2021
*Projections

1.1.2 Global Inflation
Most economies across the globe experienced inflationary pressures during the review
period, owing largely to high prices of food, energy and inputs. Inflation rate in the United
States rose to 5.4 per cent at end-June 2021, from 1.5 per cent at end-December 2020,
reaching a new high since August 2008. This development was attributable to supply
side constraints and considerable increase in commodity prices. In Japan, inflation rate
rose by 0.2 per cent year-on-year in June 2021, from negative 0.1 per cent in December
2020. In the United Kingdom, inflation rate trended upward to 2.5 per cent in June 2021,
from 0.8 per cent in December 2020, largely on account of increases in the costs of
cars, motor oil and clothing. However, inflation rate in the Euro Area trended downward
to 1.2 per cent in June 2021, from 1.4 per cent in 2020 in line with the preliminary
estimate.
FINANCIAL STABILITY REPORT – JUNE 2021

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In EMDEs, inflation rate fell to 4.3 per cent at end-June 2021, from 4.9 per cent at endDecember 2020. This development was driven largely by China’s inflation which
dropped sharply to 1.1 per cent in the review period from 2.9 per cent at end-December
2020, mainly on account of government’s recent release of base metals stockpiles and
stringent measures against speculation.

Inflation in Sub-Saharan Africa dropped to 7.2 per cent at end-June 2021, from 8.7 per
cent at end-December 2020. In Nigeria, inflation rate rose to 17.75 per cent at end-June
2021, from 15.8 per cent at end-December 2020, owing mainly to rising prices of food,
housing, transportation and utilities. Also, South Africa’s inflation rose to 4.9 per cent in
June 2021, from 3.1 per cent at end-December 2020.

TABLE 1:2 GLOBAL INFLATION

Region/Country


Advanced Economies
0.8
1.5

0.6
1.6
1.6
United States

Euro Area
0.2


Japan

United Kingdom

Emerging
Markets
&
Developing
Economies

China


Russia


Middle East & Central Asia

Sub-Saharan African

Nigeria

South Africa

Source: IMF’s World Economic Outlook, July 2021
1.1.3 Oil Prices
Crude oil prices rallied in the first half of 2021. This was mainly driven by a rapid roll-out
of COVID-19 vaccines and increased refinery demand, amidst substantial production
cut by OPEC+1 members.
Consequently, the OPEC Reference Basket (ORB) value rose by 46.21 per cent to
US$71.89 per barrel at end-June 2021, from US$49.17 per barrel at end-December
2020. Similarly, Bonny Light and UK Brent prices increased to US$75.23 and US$73.41
per barrel at end-June 2021, from US$40.21 and US$51.22 per barrel at end-December
2020, respectively.


1 OPEC and non-OPEC members
FINANCIAL STABILITY REPORT – JUNE 2021

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TABLE 1:3 PRICES OF CRUDE OIL (US$)

Dec -19
a
Dec - 20
b
Jun - 21
c
AbsChange
b-a
Abschange
c-b
%Change
(y-o-y)
%Change
(y-t-d)
OPEC
References

Brent Crude

WTI

Bonny Light


1.1.4 International Stock Markets
Major global stock markets showed mixed performance during the review period. The
massive rollout of COVID-19 vaccines as well as broad policy support in most
jurisdictions
improved
market
sentiments.
However,
weak
macroeconomic
fundamentals weighed heavily on some stock markets.


In North America, the United States S&P 500, Canadian S&P/TSX Composite and
Mexico’s Bolsa indices increased by 14.8, 15.7 and 14.1 per cent respectively, during
the review period.


In Europe, the FTSE 100, France CAC 40, and the German DAX indices increased by
10.1, 18.1 and 13.6 per cent respectively, during the review period.

In Asia, Japan’s Nikkei 225, Shanghai Stock Exchange-A, and Indian BSE Sensex
indices increased by 4.6, 3.3 and 9.2 per cent respectively.

In Africa, the South African JSE All-Share, Kenyan NSE 20 and Ghanaian GSE AllShare indices increased by 12.2, 3.2 and 36.8 per cent respectively. Conversely, the
Nigerian NGX All-Share and Egyptian EGX Case 30 indices declined by 5.9 and 5.4 per
cent respectively, during the review period. (See the table below).


FINANCIAL STABILITY REPORT – JUNE 2021

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TABLE 1:4 SELECTED INTERNATIONAL STOCK MARKET INDICES
Selected International Stock Market Indices as at June 30, 2021

Country
Index
30-Jun-20
31-Dec-20
30-Jun-21
Jun 30,
2020 -
Jun 30,

%
Change
Dec 31,
2020 - Jun
30, 2021
% Change
NORTH AMERICA
US
S&P 500

Canada
S&P/TSX Composite

Mexico
Bolsa

EUROPE
UK
FTSE 100

France
CAC 40

Germany
DAX

ASIA
Japan
NIKKEI 225

China
Shanghai SE A

India
BSE Sensex

AFRICA
Nigeria
NGX All-Share Index

South Africa
JSE All-Share Index

Kenya
Nairobi NSE 20 Share index

Egypt
EGX CASE 30

Ghana
GSE All-Share Index

Source: Bloomberg

1.1.5 Foreign Exchange Markets
Currencies of most countries depreciated against the US dollar during the review period.
In Asia, the Japanese yen, Chinese renminbi, and Indian rupee depreciated by 7.07,
0.43 and 1.70 per cent respectively. The development was largely attributed to the
effects of the latest waves of the COVID-19 pandemic which adversely impacted the
exports of those countries.

The Euro depreciated against the US dollar by 2.49 per cent owing to the lingering
effects of the COVID-19 pandemic. The pound sterling appreciated by 1.23 per cent to
the US Dollar, due to improved vaccine rollout and the partial re-opening of the British
economy. Similarly, the Russian ruble appreciated by 1.21 per cent owing to relatively
strong economic performance during the lockdown.

In Africa, the Nigerian naira marginally depreciated against the US dollar by 0.11 per
cent at end-June 2021, following increased forex pressures and external shocks. The
Ghanaian cedi depreciated against the dollar by 0.37 per cent while the South African
rand, the Kenyan shilling and Egyptian pound appreciated by 2.87, 1.23 and 0.42 per
cent respectively.

FINANCIAL STABILITY REPORT – JUNE 2021

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TABLE 1:5 TRENDS IN SELECTED CURRENCIES
Exchange Rates of Selected Countries
(Value in currency units to US$)
Regions/Countries Currency 31-Dec-20
30-Jun-21
Dec 20- Jun 21
% App/(Dep)
AFRICA
Nigeria
Naira
381.00
403.80
-5.65
South Africa
Rand
14.69
14.29
2.87
Kenya
Shilling
109.24
107.91
1.23
Egypt
Pound
15.74
15.67
0.42
Ghana
Cedi
5.87
5.89
-0.37
NORTH AMERICA
Canada
Dollar
1.27
1.24
2.64
Mexico
Peso
19.91
19.94
-0.11
EUROPE
UK
Pound
0.73
0.72
1.23
Euro Area
Euro
0.82
0.84
-2.94
Russia
Ruble
74.04
73.15
1.21
ASIA
Japan
Yen
103.25
111.11
-7.07
China
Yuan
6.43
6.46
-0.43
India
Rupee
73.07
74.33
-1.70
Source: Bloomberg

1.1.6 Monetary Policy Rates
Monetary policy rates in most central banks were relatively stable during the first half of
2021, reflecting the need to allow for complete transmission of adjustments to the policy
rates in the wake of COVID-19 pandemic. In the developed economies, such as Japan,
United States, United Kingdom and New Zealand, the policy rates remained unchanged
at -0.1, 0.25, 0.1, and 0.25 per cent, respectively.
In the Asian region, the Bank of Indonesia reduced the policy rate by 0.25 basis point
to 3.5 per cent occasioned by forecast of low inflation and the need to maintain the
stability of the rupiah exchange rate. The Bank of Malaysia on the other hand
maintained its rates at 1.75 per cent.
In the BRICS, India, China and South Africa retained the policy rates at 4.00, 3.85 and
3.50 per cent respectively. However, both the Central Bank of Brazil and the Bank of
Russia shifted to a tightening mode during the review period in response to inflation
concerns. The Central Bank of Brazil progressively increased the policy rate from 2.00
to 4.25 per cent between January and June 2021, while the Bank of Russia gradually
increased the rate from 4.25 to 5.50 per cent between February and June 2021.

In the EMDEs, Chile and Columbia maintained rates at 0.5 and 1.75 per cent
respectively, while Mexico’s Central Bank reduced its policy rate from 4.25 per cent in
January to 4.00 per cent in February but increased the rate to 4.25 per cent in June in
synch with inflationary expectations.
FINANCIAL STABILITY REPORT – JUNE 2021

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In Africa, the Bank of Egypt retained its policy rate 8.25 per cent as it continued to
maintain its inflation target of 7 per cent, plus or minus 2 percentage points. Despite
intensified inflationary pressures, the Central Bank of Nigeria maintained its policy rate
of 11.5 per cent in order to stimulate growth. The Bank of Ghana maintained its policy
rate at 14.5 from January to March 2021, but reduced it by 100 basis points to 13.5 per
cent in April. The reduction was occasioned by a drop in inflation to 7.8 per cent and the
need to support economic growth.

TABLE 1:6 EXCHANGE RATES OF SELECTED COUNTRIES (VALUE IN LOCAL CURRENCY UNITS TO US$)
First Half 2021
Country/Region
Jan
Feb
Mar
Apr
May
Jun
Developed Economies
Japan

Europe

UK

U.S

Canada

South Korea

New Zealand

Australia

Asia
Indonesia

Malaysia

BRICS
Brazil


Russia
4.25
4.25
4.5

5.5
India

China

South Africa

Other Emerging Economies
Mexico
4.25

4.25
Chile

Columbia

Africa
Egypt

Ghana

Nigeria

source: www.tradingeconomies.com www.cbrates.com


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 1:7 COMPARATIVE INTEREST RATES

Country
Current rate Previous rate Date last changed
Selected African countries


OECD
Botswana
3.75
3.75
June 17, 2021
Ghana
13.5
14.50
May 31, 2021
Kenya
7.00
7.00
April 29, 2020
Mauritius
1.85
1.85
April 16, 2020
South Africa
3.50
3.75
Jul 23, 2020
Nigeria
11.50
11.50
Sep 22, 2020
Australia
0.1
0.1
Nov 3, 2020
Canada
0.25
0.25
March 27, 2020
Euro zone
0.00
0.00
March 10. 2016
Hungary
0.9
0.60
June 22, 2021
Iceland
1.00
0.75
May 19, 2021
Japan
-0.10
-0.10
Jan 29, 2016
South Korea
0.50
0.5
May 28, 2020
Mexico
4.25
4.00
June 24, 2021
New Zealand
0.25
0.25
Mar 16, 2020
Norway
0.00
0.00
May 07, 2020
Poland
0.10
0.10
May 28, 2020
Sweden
0.00
0.00
Dec 19, 2019
Turkey
19.0
19.0
March 18, 2021
United states
0.00-0.25
0.00-0.25
Mar 15, 2020
United Kingdom
0.1
0.1
Mar 19, 2020
Switzerland
-0.75
-0.75
Jan 15, 2015
Non-OECD
China
3.85
3.85
Apr 20, 2020
Indonesia
3.5
3.5
Feb 18, 2021
Russia
5.5
5.00
June 11,, 2021
Brazil
4.25
3.5
June 16, 202
India
4.00
4.00
May 22, 2020
Argentina
38.00
38.00
Mar 05, 2020
Kazakhstan
9.00
9.00
Jul 20, 2020
United
Arab
Emirates
1.50
1.50
Mar 3, 2020
Source: Cbrates.Com; Trading Economics


FINANCIAL STABILITY REPORT – JUNE 2021

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1.1.7 Potential Risks from the Global Economic Developments
The lingering impact of the COVID-19 pandemic on global economic recovery and its
debilitating effects on the financial markets continues to pose a risk to financial stability.
Some of the likely implications of these risks are:
I.
Fragile Growth. The uncertain duration of the pandemic accentuated by the
emergence of new mutating strains of the virus and the associated impact on the
economy continues to manifest in fragile macroeconomic growth.
II.
Uneven Economic Recovery. The uneven distribution and access to COVID-19
vaccines largely tilted in favour of advanced economies, resulting in divergent
economic recovery could slow growth, especially in most emerging markets and
developing economies (EMDEs).
III.
Inflationary Pressure. The persistent accommodative monetary policy stance in
support of growth may elevate inflation in the near to medium terms, with long
term consequences for financial system stability and the general economy.
IV.
Capital Flow Challenges. The observed uptick in inflation, mainly driven by high
food prices, could trigger the tightening of financial conditions and slow down
projected growth. Also, monetary policy normalisation in some advanced
economies could induce capital outflow from some EMDEs, with adverse
implications for growth and stability.

1.2 Domestic Macroeconomic Developments
1.2.1 Output Growth
There was a gradual recovery in economic activities, following rapid improvement in the
administration of COVID-19 vaccines and policy support from the fiscal and monetary
authorities. However, shocks arising from the spread of mutating strains of the virus,
exchange rate pressures as well as structural rigidities, reduced the growth potential in
the first half of 2021. However, output grew by 2.70 per cent in the first half of 2021,
reflecting improved economic activities and increased investors’ confidence in the
economy. These factors were reinforced by the accommodative stance of monetary
policy that boosted credit to the real sector.

FIGURE 1.1 GROSS DOMESTIC PRODUCT (GROWTH %)

Source: National Bureau of Statistics

H2 2018
H1 2019
H2 2019
H1 2020
H2 2020
H1 2021
PER CENT
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as

The growth in GDP was due largely to the improved performance of the non-oil sector,
which grew by 3.70 per cent in the first half of 2021, in contrast to a 1.7 per cent decline
in the second half of 2020. The recovery was driven, mainly, by the Agriculture and
Services sectors. The performance of the Oil sector GDP also improved following
increases in oil prices and production.
TABLE 1:8 RELATIVE CONTRIBUTION TO REAL GDP

On a sectoral basis, Agriculture and Services contributed 0.41 and 2.31 percentage
points respectively, to the growth in real GDP. The Industry sector, however, pulled the
growth in GDP as it contributed negative 0.02 percentage point. The performance of the
Agriculture sector moderated relatively, owing to the decline in crop production,
following heightened security challenges in the food-producing regions, while Services
sector recovered moderately, driven by the ICT sub-sectors (Table 2.1). Despite the
improved performance of the economy, the onset of the Delta variant of the COVID-19
infections, lingering insecurity challenges and high domestic prices posed downside
risks for economic growth.

1.2.2 Inflation
Inflationary pressure persisted in the review period due largely to the improvement in
economic activities. At end-June 2021, headline inflation rose by 2.00 percentage points
to 17.75 per cent compared with 15.75 per cent at end-December 2020, driven largely
by food inflation. The 12-month-moving-average headline inflation stood at 15.93 per
cent at end-June 2021, compared with 13.25 per cent at end-December 2020. Food
inflation (year-on-year) increased by 2.27 percentage points to 21.83 per cent,
compared with 19.56 per cent at end-December 2020. The upward trend in inflation
was attributed to soaring food prices as a result of high transportation cost, security
challenges and seasonal shortages that occurred during the planting season. Core
inflation rose to 13.09 per cent in the review period, compared with 11.37 per cent
recorded in the preceding period. The increase in core inflation (year-on-year) was
attributed to high exchange rate pass-through to domestic prices and supply-chain
challenges (Figure 1.2).


Sector
H1 2020
H2 2020
H1 2021
Agriculture
0.42
0.66
0.41
Crop Production
0.37
0.63
0.38
Industry
-1.17
-1.42
-0.02
Services
-1.43
-0.94
2.31
ICT
0.12
0.15
0.95
GDP Growth
-2.18
-1.70
2.70
Source: National Bureau of Statistics
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 1.2 INFLATIONARY TREND (YEAR-ON-YEAR


1.2.3 Fiscal Operations2
Provisional data on Federal Government Retained Revenue, at N2,044.74 billion in the
first half of 2021, was below the budget benchmark by 48.8 per cent due to a significant
drop in revenue from Others3. This, however, represented an increase of 5.0 per cent
relative to the receipts in the corresponding period of 2020, owing to the improvement
in FGN Independent Revenue and VAT. Aggregate expenditure, at N6,614.79 billion, in
the first half of 2021 was below the benchmark by 2.6 per cent but above the level in
the corresponding period of 2020 by 41.3 per cent. The increase in total expenditure
was as a result of the rise in interest payments on the government’s obligations.
Consequently, the fiscal operations of the Federal Government resulted in overall deficit
of N4,570.05 billion, which was 63.2 per cent above the budget benchmark of N2,800.81
billion, and 67.1 per cent above the level in the first half of 2020. The high deficit
reflected the Government’s policy stance of sustaining economic growth, ensuring the
completion of ongoing critical infrastructure projects and cushioned the impact of the
pandemic on the economy. The deficit was financed from both domestic and external
sources.
The consolidated debt stock of the Federal Government at end-March 2021 stood at
N28,984.30 billion, comprising 57.6 and 42.4 per cent domestic and external debt
respectively. The debt stock at end-March 2021 indicated an increase of 3.4 per cent
over the level at end-June 2020; and at 36.8 per cent of GDP, was below the Medium-

2 Data from July to September 2020 were obtained from OAGF, while those for October to December 2020 were CBN staff estimates.

3 Includes Transfers from Special Levies Accounts, FGN’s share of Signature Bonus, Domestic Recoveries, Stamp Duty, Grants and Donor
Funding and Share of NLNG Dividend.


2020 H1
2020 H2
2021 H1
Headline (y-on-Y)
Core (Y-on-Y)
Food (Y-on-Y)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
Term Debt Strategy (MTDS) threshold of 40.0 per cent of GDP. The threshold was
reviewed in order to accommodate new borrowings to fund Budget Deficits and other
expenditure obligations of the Government.

FIGURE 1.3 FEDERAL GOVERNMENT DOMESTIC DEBT STOCK


FIGURE 1.4 FEDERAL GOVERNMENT FISCAL OPERATIONS (N BILLION)


FGN Bonds
NTBills
NTBonds
FGN Savings Bonds
FGN Sukuk
FGN Green Bonds
Promisory Note


First Half 2019
Second Half 2019
First Half 2020
Second Half 2020
First Half 2021
Revenue
Expenditure
Fiscal Balance
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
BOX 1: CBN CONTINUED WITH THE 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 licences;
• Suspension of the sale of foreign currency to Bureaux-De-Change Operators as part
of the lockdown measures;
• ₦1.0 trillion credit facility for the manufacturing sector;
• The ₦50.0 billion Targeted Credit Facility stimulus package disbursed through
NIRSAL MFB to support households and MSMEs that were affected by the
coronavirus pandemic; and
• ₦100.0 billion credit facility for the pharmaceutical companies.

The CBN provided guidelines to the banking industry in March and May 2020 for the
restructuring of credit facilities impacted by the Covid-19 pandemic. The criteria for
credits to be restructured were that the facilities should have secured acceptable
collateral and be for sectors in which businesses and cashflows had been adversely
impacted by the pandemic. The guidelines also required that banks do not charge
restructuring fees and excluded facilities categorized as lost or expired facilities pending
renewal.
Furthermore, the guidelines limited the moratorium on principal payments to 12 months
whilst rescheduled payments did not qualify as defaults 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, 28.18 per cent of the industry’s credit had been restructured at
end-December 2020. The Oil and Gas, Manufacturing, General Commerce and Other
sectors accounted for 42.31, 14.55, 5.37 and 37.77 per cent, respectively, of the total
restructured facilities.
The CBN will continue to monitor bank NPLs closely against the regulatory maximum
of 5 per cent to forestall spikes in NPLs. The sustained implementation of the Global
Standing Instruction in the banking industry would enhance repayments and recoveries
in the industry.


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
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 principal and/or interest) under this Guideline
shall not qualify as a default for the purposes of supervisory reporting.

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 collaterals includes:

a. Cash
b. Treasury bills and government securities, e.g. bonds;
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
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.

1.2.4 External Reserves
Gross external reserves at end-June 2021 stood at US$32.99 billion, compared with
US$36.48 billion at end-December 2020. A breakdown of the external reserves
indicated that the CBN, FGN and Federation holdings were 86.15, 13.67 and 0.18 per
cent respectively. Further analysis showed that 79.59 per cent of the reserves was held
in US dollars, 12.83 per cent in renminbi, 6.31 per cent in SDRs and 1.27 per cent in
other currencies at end-June 2021.

Total inflow to the external reserves was US$14.06 billion in the first half of 2021,
compared with US$15.15 billion in the second half of 2020, reflecting a decrease of
US$1.09 billion or 7.19 per cent. Total outflow increased by US$2.73 billion or 18.30 per
cent to US$17.65 billion, compared with US$14.92 billion in the second half of 2020.

FIGURE 1.5 EXTERNAL RESERVE POSITION


TABLE 1:9 FOREIGN EXCHANGE FLOWS THROUGH THE CBN (US$ MILLION)

Million US$
Period
Inflow
Outflow
Net flow
H1 – 2021
14,060.38
17,646.13
(3,585.75)
H2 – 2020
15,149.77
14,917.55
232.22
H1 – 2020
24,840.24
27,324.80
(2,484.55)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as

1.2.5 Risks to the External Reserves
Downside risks to the external reserves include:
1. The tightening of monetary policy stance following normalisation and build-up in
global debt would lead to lower asset values and have a negative impact on
external reserves.

2. The lingering and mutating COVID-19 variants, particularly in Japan and India,
could weaken the current growth trajectory and decrease demand for crude oil.
This could lead to lower oil prices decrease in accretion to the external reserves.


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
2 DEVELOPMENTS IN THE FINANCIAL SYSTEM
2.1 Monetary and Credit Developments
Broad money supply (M3) grew by 2.02 per cent (annualised to 4.04 per cent) to
N39,406.65 billion at end-June 2021. This was driven by the growth of 4.30 per cent in
Domestic Claims (DC), which more than offset the 3.65 per cent decline in net foreign
assets (NFA). The increase in DC was attributed to the credit disbursement to the
private sector to ameliorate the adverse effects of the pandemic.

The increase in total monetary liabilities was due to the 4.67 per cent and 2.13 per cent
increase in ‘Other’ deposits and transferable deposits of the Depository Corporations
(DCs) respectively. ‘Other’ deposits (2.63 percentage points) and transferable deposits
(0.74 percentage point) were the main contributors to M3 growth. Narrow money (M1)
grew by 0.25 per cent to N16,016.75 billion at end-June 2021, above N15,976.62 billion
at end-December 2020. The marginal growth in M1 stock was due to increased usage
of electronic channels, reflecting improved confidence in the banking system.

TABLE 2:1 GROWTH RATES OF MONETARY AGGREGATES
% Change (Over preceding December)
Dec 19
Jun 20
Dec 20
Jun 21
Foreign Assets (Net)

Domestic Claims

Claims on Central Government (Net)

Claims on Other Sectors

Other Items (Net)

Currency Outside Depository Corporations

Transferable Deposits

Narrow Money Supply (M1)

Other Deposits

Monetary Liabilities (M2)

Securities Other than Shares

Total Monetary Liabilities (M3)


2.1.1 Market Structure of the Banking Industry
During the review period, six banks accounted for 68.8 and 66.4 per cent of total
deposits and assets respectively. There was no dominance of any bank, as the share
of individual banks ranged from 0.10 to 14.5 per cent in deposits and 0.30 to 15.6 per
cent in assets in the review period. This was further confirmed by the Herfindahl
Hirschman Indices (HHI)4 of 936.66 for deposits and 907.93 for assets at end-June
2021.


4 on a scale of 100 to 10,000
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as

FIGURE 2.1 CONCENTRATION RATIOS OF THE BANKING INDUSTRY ASSETS AND DEPOSITS

2.1.2 Consumer Credit
Consumer credit grew by 11.2 per cent to N1,840.24 billion at end-June 2021, compared
with N1,655.21 billion at end-December 2020, following sustained implementation of
the Loan-to-Deposit Ratio (LDR) policy and other interventions by the Bank. The
increase in consumer credit accounted for the rise in private sector credit to an all-time
high of ₦21,266.82 billion at the end of the review period.

FIGURE 2.2 CONSUMER CREDIT


2.1.3 Sectoral Distribution of Credit
Credit utilisation by private the sector of the economy grew by 7.5 per cent to
N21,895.31 billion at end-June 2021, over its level at end-December 2020. A breakdown
showed that Industry and Services sectors remained dominant, as their shares in total
credit stood at 37.3 and 36.8 per cent, at end-June 2021, compared with 37.2 and 37.6
per cent at end-December 2020 respectively.

Agriculture and Construction sectors were the least recipients, accounting for 5.3 and
5.0 per cent respectively, at end-June 2021, compared with their respective levels of
5.2 and 4.7 per cent at end-December 2020 (Table 2:2).

0.00
500.00
1000.00

Jun 19
Dec 19
Jun 20
Dec-20
Jun-21
HHI
Concentration Ratio
CR(Deposits)
CR( Assets)
CR( Largest-Deposits)
CR (Largest-Assets)
HHI (Deposits) (rhs)
HHI (Assets) (rhs)


Jun_19
Dec_19
Jun-20
Dec_20
Jun_21
₦'Billion
Ratio (%)
Ratio to claims on private sector (lhs)
Consumer credit (rhs)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 2:2 SECTORAL ALLOCATION OF CREDIT (%)

Jun-20
Dec-20
Jun-21
Agriculture
4.8
5.2
5.3
Industry
37.7
37.2
37.3
Construction
4.6
4.7
5.0
Trade/General
Commerce
6.5
6.6
6.3
Government
8.0
8.7
9.3
Services
38.4
37.6
36.8

2.2 Other Financial Institutions
There were 6,620 OFIs5 at end-June 2021, comprising seven (7) Development Finance
Institutions (DFIs), 875 Microfinance Banks (MFBs), 91 Finance Companies (FCs), 34
Primary Mortgage Banks (PMBs) and 5,613 Bureaux-de-change (BDCs), compared
with 6,532 OFIs at end-December 2020. The difference followed the licensing of two (2)
Microfinance Banks (MFBs), four (4) Finance Companies (FCs) and 83 Bureaux de
Change (BDCs), and conversion of one (1) National MFB to a Commercial Bank with
regional authorisation. The increased number of licensed OFIs recorded during the
review period enhanced access to credit by MSMEs and promoted inclusive growth.

TABLE 2:3 Licensed Other Financial Institutions
S/N
Type
Total Licensed Institutions as
at Jun 30, 2021
Total Licensed
Institutions as at Dec
31, 2020

Microfinance Banks

Bureaux De Change
5,613
5,530

Finance Companies

Development Finance Institutions

Primary Mortgage Banks

Total
6,620
6,532

The total assets of the OFIs (excluding the BDCs) increased by 9.00 per cent to
N5,176.36 billion at end-June 2021, compared with N4,748.76 billion at end-December
2020. This was attributed mainly to increase in net loans and advances, and cash and
bank balances. Further analysis revealed that net loans and advances increased by

5 Other Financial Institutions (OFIs)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
17.60 per cent to N2,532.38 billion at end-June 2021, from N2,153.43 billion at endDecember 2020, while cash and bank balances increased by 59.16 per cent to N303.24
billion at end-June 2021, from N190.52 billion at end-December 2020. The significant
increase in cash and bank balances was attributed to capital injection in compliance
with the new capital regime for MFBs. However, placements with banks and
investments declined by 4.23 and 3.89 per cent to N816.38 billion and N1,114.39 billion
respectively, at end-June 2021, from N852.56 billion and N1,159.48 billion at endDecember 2020.
Long-term liabilities increased by 46.01 per cent to N596.02 billion at end-June 2021,
from N408.19 billion at end-December 2020, while other liabilities increased by 26.07
per cent to N875.45 billion at end-June 2021, compared with N694.44 billion at endDecember 2020. Also, shareholders’ funds increased by 12.02 per cent to N651.04
billion at end-June 2021, compared with N581.16 billion at end-December 2020. The
increase in shareholders’ funds was due largely to accretion to consolidated reserves
of DFIs and FCs, and capital injection by the MFBs.
2.2.1 Development Finance Institutions
Total assets of the seven DFIs6 increased by 2.41 per cent to N3,117.74 billion at endJune 2021, compared with N3,044.48 billion at end-December 2020. The analysis of
the total assets showed that cash and bank balances and net loans and advances
increased by N46.113 billion or 178.20 per cent and N102.116 billion or 7.95 per cent
respectively. Conversely, investment and placement with banks declined by
N59.651billion or 5.62 per cent and N11.272 billion or 2.1 per cent respectively.

A disaggregation of the total assets by institution, indicated that BOI, DBN, FMBN,
NEXIM, NMRC, BOA and TIB accounted for 61.34, 15.38, 13.01, 5.85, 2.69, 1.56 and
0.17 per cent respectively. Furthermore, BOI, DBN, FMBN, NEXIM, BOA and NMRC
accounted for 52.26, 19.48, 19.03, 5.02, 2.89 and 1.32 per cent, of total net loans and
advances respectively.

Shareholders’ funds increased by 13.95 per cent to N422.26 billion at end-June 2021,
compared with N370.58 billion at end-December 2020 due to accretion to reserves by
BOI, DBN and NMRC. Long-term liabilities also increased by 40.96 per cent to N50.94
billion at end-June 2021, compared with N36.14 billion at end-December 2020.


6 Bank of Industry (BOI), Development Bank of Nigeria (DBN), Federal Mortgage Bank of Nigeria (FMBN), Nigeria Export-Import
Bank (NEXIM), Nigeria Mortgage Refinance Company (NMRC), Bank of Agriculture (BOA) and The Infrastructure Bank (TIB)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 2.3 DFIS TOTAL ASSETS, AND LOANS AND ADVANCES

Bank of Industry (BOI), Development Bank of Nigeria (DBN), Federal Mortgage
Bank of Nigeria (FMBN), Nigeria Export Import Bank (NEXIM)

Nigeria Mortgage Refinance Company (NMRC), Bank of Agriculture (BOA), The
Infrastructure Bank (TIB)


2.2.2 Primary Mortgage Banks
The number of Primary Mortgage Banks (PMBs) at end-June 2021 remained 34,
comprising 22 State and 12 National PMBs. The total assets of the sub-sector
increased by 8.66 per cent to N501.30 billion at end-June 2021, from N461.34 billion
at end-December 2020. A breakdown of total assets showed that placements with
banks and short-term investments increased by 21.48 and 58.36 per cent to N70.35
billion and N11.50 billion respectively, at end-June 2021, compared with N57.91 billion
and N7.26 billion at end-December 2020. Similarly, loans and advances and other
assets increased by 6.71 and 21.83 per cent to N264.74 billion and N60.56 billion
respectively, at end-June 2021, compared with N248.09 billion and N49.71 billion at
end-December 2020. Non-current assets held for sale, however, decreased by 8.55
per cent to N43.64 billion at end-June 2021, from N47.72 billion at end-December 2020.

Shareholders’ funds increased by 2.42 per cent to N36.92 billion at end-June 2021,
compared with N36.05 billion at end-December 2020. This was due largely to capital
injection and improvement in reserves. Capital and reserves increased by 0.37 and
0.65 per cent respectively, to N108.72 billion and negative N71.80 billion at end-June
2021, compared with N108.32 billion and negative N72.27 billion at end-December
2020. Also, Deposit Liabilities, Due to Other Banks, Long-term Loans and Other
Liabilities increased to N182.87 billion, N14.39 billion, N76.97 billion and N190.16
billion at end-June 2021, from N170.82 billion, N3.86 billion, N72.17 billion and
N178.44 billion respectively, at end-December 2020. (Table 2:4)
Loanable funds available to the sub-sector at end-June 2021 amounted to N45.27
billion. The funds were mainly from Deposits, N12.05 billion; Due to Other Banks,
BOI
61%
DBN
15%
FMBN
13%
NEXIM
6%
NMRC
3%
BOA
2%
TIB
0%
Assets of DFIs by Institution
BOI
52%
DBN
20%
FMBN
19%
NEXIM
5%
BOA
1%
NMRC
3%
Total Loans and advances
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
N10.52 billion; Other Liabilities, N4.79 billion; and Long-term Loans/NHF7, N11.72
billion: as well as decrease in non-current assets held for sale, N4.08 billion. The funds
were utilised mainly for Loans and Advances, N16.64 billion; Placements with banks,
N12.44 billion; Other Assets, N10.85 billion; and Short-term investments, N4.24 billion.
TABLE 2:4 PMB FINANCIAL HIGHLIGHTS AT END-JUNE 2021

End-June 2021
(N’ billion)
End-December 2020
(N’ billion)
% Change
Total assets
501.30
461.34
8.66
Balances with Other Banks
19.80
19.69
0.55
Loans and Advances
264.74
248.09
6.71
Placements with banks
70.35
57.91
21.48
Other Assets
60.56
49.71
21.83
Short-term Investment
11.50
7.26
58.36
Deposit liabilities
180.87
170.82
7.06
Other liabilities
190.16
178.44
6.57
Long-term Loans/NHF
76.97
72.17
6.64
Shareholders’ Funds
36.92
36.05
2.42

The Capital Adequacy Ratio (CAR) of the sub-sector stood at 11.29 per cent at endJune 2021, compared with 11.49 per cent at end-December 2020. Although, above the
regulatory threshold of 10.00 per cent, the decline was due, largely, to increase in risk
weighted assets. The average liquidity and non-performing loan ratios of the sub-sector
stood at 48.31 and 48.91 per cent respectively, at end-June 2021, compared with 48.16
and 48.94 per cent at end-December 2020.

FIGURE 2.4 ASSETS OF PRIMARY MORTGAGE BANKS


7 National Housing Fund
Cash
0%
Cash Reserve
Requirement
1%
Balances
with Banks
5%
Loans and
advances
66%
Placements
with banks
15%
Non-Current
Assets Held
for Sale
13%
Assets of PMBs at End-Dec 2020
Cash
0%
Cash Reserve
Requirement
1%
Balances
with Banks
4%
Loans and
advances
68%
Placements
with banks
13%
Non-Current
Assets Held
for Sale
14%
Assets of PMBs at End-Jun 2021
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as

FIGURE 2.5 LIABILITY STRUCTURE OF PRIMARY MORTGAGE BANKS


FIGURE 2.6 SOURCES OF LOANABLE FUNDS OF PRIMARY MORTGAGE BANK

2.2.3 Finance Companies
The number of FCs increased to 91 at end-June 2021, compared with 87 at endDecember 2020, following the licensing of four (4) new institutions. Total assets of the
sub-sector increased by 6.49 per cent to N333.43 billion at end-June 2021, compared
with N313.11 billion at end-December 2020. This was due, largely, to an increase in
investments by 76.41 per cent to N20.04 billion at end-June 2021 from N11.36 billion at
end-December 2020. Also, net Loans and Advances increased by 25.66 per cent to
N142.69 billion at end-June 2021, from N113.55 billion at end-December 2020,
reflecting improved economic activities.

Shareholders’ funds increased by 8.91 per cent to N47.72 billion at end-June 2021,
compared with N43.82 billion at end-December 2020. Borrowings also increased by
Deposit liabilities
27%
Paid-up Capital
20%
Long-term
Loans/NHF
13%
Other liabilities
31%
Shareholders’ funds
9%
Composition of PMBs' Liability at end-June 2021
Deposits
60%
Other liabilities
34%
Disposal of Noncurrent Assets
6%
Sources of loanable Funds At End Dec 2020 (N45.40bn)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
10.16 per cent to N221.03 billion at end-June 2021, from N200.64 billion at endDecember 2020. Other Liabilities, however, decreased by 8.01 per cent to N61.44 billion
at end-June 2021, compared with N66.80 billion at end-December 2020.

TABLE 2:5 FINANCIAL POSITION OF FINANCE COMPANIES AT END-JUNE 2021


End-June 2021
(N’ billion)
End-Dec 2020
(N’ billion)
Change
(N’
billion)
% Change

Total Assets

Cash in Vault

Balances
with
Banks

Net
Loans
and
Advances

Investments

Placements

Fixed Assets

Borrowings

Shareholders’
Funds

Paid-up capital

Reserves


FIGURE 2.7 ASSETS OF FINANCE COMPANIES

Jun-2021
Dec-2020
333.43
313.11
Total Assest of FCs (Nbn)

Jun-2021
Dec-2020
142.69
113.55
Net Loans and Advances
(Nbn)

Jun-2021
Dec-2020
22.2
26.2
Balances With Banks (Nbn)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 2.8 BORROWINGS OF FINANCE COMPANIES


2.2.4 Microfinance Banks
At end-June 2021, the number of MFBs stood at 875 compared, with 874 at endDecember 2020, comprising nine (9) National, 132 State, and 734 Units, compared with
10 National, 134 State, and 730 Units at end-December 2020. The increase was due to
the licensing of two (2) new MFBs and conversion of one National MFB to a commercial
bank with regional authorisation during the review period.

Total assets at end-June 2021 stood at N1,223.89 billion, compared with N929.83 billion
at end-December 2020, reflecting an increase of 31.63 per cent. This was due, largely,
to the increase in net Loans and Advances and Balances with banks by 45.49 and 59.05
per cent respectively, to N739.00 billion and N171.81 billion at end-June 2021,
compared with N507.95 billion and N108.02 billion at end-December 2020. Conversely,
Placements with banks declined by 14.52 per cent to N181.51 billion at end-June 2021,
from N212.34 billion at end-December 2020.

Shareholders’ funds increased by 10.27 per cent to N144.14 billion at end-June 2021,
compared with N130.71 billion at end-December 2020, consequent upon the injection
of capital and accretion to reserves. Long-term Loans/On-lending also increased by
55.98 per cent to N464.87 billion at end-June 2021 from N298.03 billion at endDecember 2020. Similarly, Other Liabilities increased by 109.65 per cent to N230.63
billion at end-June 2021, compared with N110.01 billion at end-December 2020.

Jun-2021
Dec-2020
221.03
200.64
BORROWINGS (NBN)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 2:6 HIGHLIGHTS OF FINANCIAL POSITION OF MFBS AT END-JUNE 2021

End-Jun 2021
End-Dec 2020
Change
%
Change
(N’ billion)
(N’ billion)
(N’
billion)
Total Assets

Balances with Banks

Placements with Banks

Net Loans and Advances

Other Assets

Paid-up Capital

Reserves

Shareholders’ Funds

Deposits

Long Term Loans/On-Lending

Other Liabilities


Loanable funds available to the sub-sector at end-June 2021 amounted to N332.78
billion. The funds were mainly from Long-term borrowing, N166.84 billion; Other
Labilities, N120.62 billion; Paid-up Capital, N8.51 billion; and decrease in placement
with banks, N30.82 billion. The funds were utilised mainly to increase Loans and
Advances, N231.05 billion; Other Assets, N15.15 billion; and Balances with banks,
N63.79 billion.

The capital adequacy ratio, liquidity ratio and portfolio-at-risk of the sub-sector were
15.8, 105.5 and 6.6 per cent respectively, at end-June 2021. Further review indicated
that 558 MFBs met the minimum capital adequacy ratio of 10 per cent, 644 met the
minimum liquidity ratio of 20.0 per cent, while 201 MFBs operated within the maximum
portfolio-at-risk of 5 per cent.

2.2.4.1 Capacity Building Programme
As part of the capacity building efforts, 301 staff of MFBs were certified by the Chartered
Institute of Bankers of Nigeria (CIBN), on completion of the Microfinance Certification
Programme during the review period. Consequently, the total number of certified staff
increased to 7,403 at end-June 2021, from 7,102 at end-December 2020.
A workshop was also organized by the Bank for External Auditors with a view to
enhancing the quality of audited financial statements.

FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
2.2.4.2 New Capital Regime for Microfinance Banks
In line with the Circular on Review of Minimum Capital Requirements for MFBs in Nigeria
dated April 2020, a total of 2218 MFBs had met the first phase milestone of April 2021,
while the second phase will be due in April 2022.

2.2.4.3 Maturity Structure of Loans and Advances and Deposit Liabilities
Short-term loans with maturity periods of less than 360 accounted for N319.316 billion
or 43 per cent of total loans at end-June 2021, while the short term deposits of the same
tenor accounted for N294.835 billion or 80 per cent of the total deposit liabilities at endJune 2021. Short-term loans therefore provided a cover of 108.30 per cent for the shortterm deposits at end-June 2021. On the other hand, long term loans with maturity
periods of over 360 days accounted for N419.683 billion or 57 per cent of total loans, at
end-June 2021 while, the long-term deposits with tenors of 360 days and above
accounted for N73.131 billion or 20 per cent of total deposit liabilities, at end-June 2021.
Long term loans provided a cover of 573.88 per cent for the long-term deposits of the
same maturity. Though the deposit structure remained largely short-term, as deposits
of less than one (1) year maturity accounted for 80 per cent of total deposits at endJune 2021, total loans provided adequate cover for the deposit liabilities of different
tenors, as well as adequate buffer to mitigate any potential impact of the mismatch that
might result in liquidity crisis.

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

End-Jun 2021
End-Dec 2020
Tenor/Period
Loans and Advances
Deposits
Loans and Advances
Deposits

(N’ 000)
(N’ 000)
(N’ 000)
(N’ 000)
0-30 Days

31-60 Days

61-90 Days

91-180 Days

181-360 Days

Short-Term

Above 360 Days

Total


2.2.5 Bureaux De Change
The number of BDCs stood at 5,613 at end-June 2021, compared with 5,530 at endDecember 2020, indicating an increase of 83 occasioned by the licensing of new

8 7 National, 14 State, 49 Tier 1 Unit and 151 Tier 2 Unit
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
institutions during the review period. The increase was to expand access to foreign
exchange at the retail market. There was a nationwide training on AML/CFT, returns
rendition and audited financial statements in four zones namely Lagos, Kano, Abuja and
Delta for BDCs.

2.3 Financial Markets
The Nigerian financial market remained resilient in the first half of 2021, despite the
impact of the COVID-19 pandemic and structural challenges. The increased rollout of
the COVID-19 vaccine coupled with sustained fiscal and monetary policy support
boosted economic activities and improved investors’ confidence.


2.3.1 The Money Market
The Bank maintained its accommodative monetary stance evident in the decision of the
Monetary Policy Committee (MPC) to hold the Monetary Policy Rate (MPR) at 11.50
per cent, with an asymmetric corridor of +100/-700 basis points for Standing Lending
Facility (SLF) and Standing Deposit Facility (SDF). Also, Cash Reserve Ratio (CRR)
and Liquidity Ratio (LR) were maintained at 27.50 and 30.00 per cent, respectively.
During the review period, Open Market Operations (OMO), Cash Reserve Requirement
(CRR) debits and sale of foreign exchange constituted major withdrawals from the
system. The open-buy-back (OBB) and unsecured interbank call weighted daily average
opened at 0.63 and 3.00 per cent respectively. The rates peaked at 32.91 and 30.00
per cent for OBB and unsecured interbank call on April 30, 2021. The decrease in
banking system liquidity followed CRR debits and sale of foreign exchange. The rates,
thereafter, moderated to 14.00 on June 7, 2021 for unsecured interbank calls, and 12.06
per cent on June 30, 2021, for OBB (Figure 2.1).

The monthly average OBB and inter-bank call rates closed at 16.39 and 16.87 per cent
at end-June 2021, compared with 1.02 and 1.25 per cent, respectively
at end-December 2020, owing to tight liquidity conditions in the market occasioned by
periodic government securities auctions and other monetary policy operations. The OBB
rates ranged between 0.36 and 32.91 per cent, while the inter-bank call rates ranged
between 2.00 and 30.00 per cent, compared with 0.37 and 23.49 per cent and 1.00 and
18.00 per cent, respectively, in the second half of 2020 (Figure 2.9Figure 2.9).

FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 2.9 AVERAGE MONEY MARKET RATES MOVEMENTS JAN – JUN 2021


2.3.1.1 Nigerian Treasury Bills
Nigerian Treasury Bills (NTBs) of 91-, 182-, and 364- day maturities, totaling N1,665.62
billion, were issued and allotted during the first half of 2021. This reflected a decrease
of N201.84 billion or 10.81 per cent, compared with N1,867.46 billion in the second half
of 2020. Similarly, total subscription was N3,101.23 billion, reflecting a decrease of
N1,926.38 billion or 38.32 per cent, compared with N5,027.61 billion in the second half
of 2020.
The holding structure of NTBs allotted during the review period indicated that
commercial banks (including foreign investors) held N1,254.39 billion or 75.31 per cent,
while mandate and internal fund customers took up the balance of N411.23 billion or
24.69 per cent. In the preceding period, commercial banks (including foreign investors)
held N1,340.25 billion or 71.77 per cent, merchant banks N56.00 billion or 3.00 per cent,
while mandate and internal fund customers held N471.20 billion or 25.23 per cent.
The total stock of NTBs outstanding at end-June 2021 stood at N2.99 trillion. The
holding structure indicated that commercial banks accounted for 53.95 per cent,
mandate customers (22.76 per cent) and merchant banks (0.48 per cent), while CBN
held the balance of 22.81 per cent. The range of average marginal rates for the period
were 0.5000 – 2.5000 per cent for the 91-day, 1.0000 – 3.5000 per cent for 182- day
and 1.5000 - 9.7500 per cent for the 364-day tenors.
2.3.2 Developments in Interest Rates
In the first half of 2021, the average prime lending and maximum lending rates fell by
0.99 and 0.32 percentage point to 11.28 and 28.60 per cent, respectively, compared
JAN
FEB
MAR
APR
MAY
JUN
Inter-Bank Call (%)

Open-Buy-Back (OBB) (%)

MPR (%)

Call NIBOR (%)

30-day NIBOR

Per Cent
Inter-Bank Call (%)
Open-Buy-Back (OBB) (%)
MPR (%)
Call NIBOR (%)
30-day NIBOR
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
with 12.27 and 28.92 per cent, in the second half of 2020. Average term-deposit rate
rose by 0.05 percentage point to 4.11 per cent, narrowing the spread between the
average term-deposit and average maximum lending rates. The volume of transactions
for the prime lending rate rose by 9.0 per cent to 120,151.20 in the first half of 2021,
from 110,224.40 in the second half of 2020, while the volume of transaction at the
maximum lending rate fell by 11.2 per cent to 1,676.85 in the review period, from
1,889.34 in the second half of 2020. The decrease in lending rates reflected the impact
of the accommodative monetary policy stance during the review period.

2.3.3 The Foreign Exchange Market
During the review period, the Bank sustained its various foreign exchange interventions
in the retail Secondary Market Intervention Sales (SMIS) window for agriculture, airline,
petroleum, raw materials and machinery transactions. Also, the Bank increased its sales
of foreign exchange for invisible transactions, such as personal and business travels,
medicals and school fees. The SMEs, oil companies and the Investors & Exporters (I&E)
windows, also widened access to foreign exchange, while the sales to the BDC segment
was sustained. In addition, the Bank readjusted the interbank rates on May 14, 2021, to
reflect developments in the market in a bid to ensure convergence of rates. The Bank
also continued its participation in the Naira-Settled OTC Futures Market.
Meanwhile, in order to improve liquidity in the foreign exchange market and conserve
the external reserves, the Bank renewed the Bilateral Currency Swap Agreement with
the People’s Bank of China, following its expiration in April 2021. A total of 11 auctions
were conducted and CNY1,217.09 million was sold in the review period, compared with
CNY723.05 million sold in the preceding period. A total of CNY3,849.43 million had
been sold from inception to end-June 2021.
2.3.3.1 Exchange Rate Movements
The rate at the I&E window opened at N394.30/US$ on January 4, 2021 and closed at
N410.15/US$ on June 30, 2021, reflecting a 3.86 per cent depreciation. At the BDC
segment, the exchange rate opened and closed at N468.00/US$ and N495.00/US$ on
January 1 and June 30, 2021 respectively, indicating a 5.45 per cent depreciation (Figure
2.10).


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 2.10 BDC AND I & E RATES JAN – JUN 2021

2.3.3.2 Spot, Forwards and OTC FX Futures Transactions
The total foreign exchange sales by the Bank in the first half of 2021 were US$5,831.01
million, compared with US$7,202.27 million in the second half of 2020, reflecting a
decrease of 19.04 per cent. A breakdown indicated that retail spot sales amounted to
US$435.03 million; invisible trade sales, US$336.49 million; I&E window, US$1,375.00
million; SMEs, US$734.36 million; and Retail forward sales, US$2,950.13 million.
Forward contracts, amounting to US$4,235.79 million, matured, while US$2,815.95
million was outstanding at end-June 2021. Furthermore, the Bank purchased
US$815.46 million, resulting in net sales of US$5,015.55 million.

TABLE 2:8 FOREIGN EXCHANGE SALES AND PURCHASES AT THE INTERBANK SEGMENT
FX Transactions
End-Dec 20
End-Jun 21

($ million)
($ million)
Spot
583.95
435.03
Invisibles
262.60
336.49
SME
611.26
734.36
I&E
2,935.67
1,375.00
Forwards
2,808.79
2,950.13
Total Sales
7,202.27
5831.01


Purchases
1,248.39
815.46

Jan
Feb
Mar
Apr
May
Jun
I & E window

BDC

N/US$
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
The notional amount of OTC FX Futures contracts executed, matured and outstanding
during the review period stood at US$3,145.09 million, US$6,987.38 million and
US$4,251.38 million respectively, compared with US$4,251.38 million, US$4,549.44
million and US$9,623.43 million, at end-December 2020.
2.3.4 The Capital Market
The Federal Government sustained the implementation of the 2021 Budget, especially
on infrastructure funding relating to power, roads and railway. Furthermore, policies on
ease of doing business as well as sustained implementation of the finance act had
positive impact on the financial market.
The Nigerian stock market recorded a bearish performance in the first half of 2021,
resulting mainly from profit-taking and asset switching due to attractive fixed income
yields and other alternative investment options offering higher interest rates, thereby
dampening the appetite for stocks.
2.3.4.1 The Equities Market
The Nigerian Exchange Limited (NGX) All Share Index (ASI) closed at 37,907.28 at
end-June 2021, reflecting a decrease of 5.87 per cent, compared with 40,270.72 at endDecember 2020. Similarly, the Market capitalisation (MC) closed at N19,760.39 billion,
indicating a decrease of 6.15 per cent, compared with N21,056.08 billion at the end of
the preceding period.

Foreign portfolio investment (FPI) inflows totaled N105.24 billion, while divestments
(outflows) stood at N116.72 billion, reflecting a net outflow of N11.48 billion in the first
half of 2021. In comparison, inflows in the second half of 2020 amounted to N117.32
billion, while divestments stood at N215.25 billion, reflecting a net outflow of N97.93
billion. The considerable volume of net outflow in the preceding half year could be
attributed to investors’ apathy occasioned by COVID-19 induced uncertainties (Table
2:9)

Foreign Portfolio Flows accounted for 21.46 per cent of total equity transactions in the
review period, which was lower than the 28.56 per cent recorded in the preceding
period. Domestic transactions accounted for the balance of 78.54 per cent in the equity
market, compared with 71.44 per cent in the preceding period (Table 2:9).


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 2:9 OUTSTANDING BONDS (N’BILLION)
Type
End-Dec

End-Jun

% Change
Proportion of
Total End-Dec

Proportion of
Total End-Jun

FGN Bonds

Sub-National
Bonds

Corporate
Bonds

Sukuk - FGN
362.56
362.56

2.77
2.48
Sukuk-SubNational
1.37
0.00

0.01
0.00
Green - FGN
25.69
25.69

0.20
0.18
Green
–
Corporate
23.50
23.50

0.18
0.16
FGN
Savings
Bonds

Total (N)
13,071.28
14,591.07

Source: DMO and FMDQ OTC

2.4.4 Potential Risks to Stability from the developments in the Financial Markets
1. Higher inflation expectations amidst exchange rate depreciation.
2. Increase in household and corporate debts as a fall-out of pandemic-related
risks.
3. Vulnerabilities arising from capital flow reversals and oil price shocks.

2.4 Real Sector Interventions
During the review period, the Bank sustained its intervention programmes and schemes
in the real sector, with emphasis on households and businesses affected by the
economic disruptions associated with the COVID-19 pandemic lockdown measures.
2.4.1 Agricultural Policy Support
2.4.1.1 Agricultural Credit Guarantee Scheme
In the first half of 2021, a total of 9,719 loans, valued ₦2.17 billion were guaranteed
under the scheme compared, with 10,626 loans, valued ₦2.84 billion in the second half
of 2020. These developments indicated a decrease of 8.54 and 23.59 per cent
respectively, in the number and value of loans guaranteed. Also, 17,742 loans valued
₦1.75 billion were repaid, compared with 14,097 loans valued at ₦2.25 billion in the
second half of 2020. These changes reflected an increase of 25.86 per cent in number
and decrease of 22.22 per cent in value of loans repaid.
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
2.4.1.2 Commercial Agriculture Credit Scheme
Under the Scheme, ₦16.25 billion was disbursed in the first half of 2021, implying a
decrease of 54.02 per cent, compared with ₦35.34 billion in the second half of 2020.
On the other hand, a total of ₦20.01 billion was repaid in the review period, showing a
decrease of 22.95 per cent compared with ₦25.97 billion in the second half of 2020.
2.4.1.3 Anchor Borrowers’ Programme
In the first half of 2021, the sum of ₦179.35 billion was disbursed to 1,008,457
smallholder farmers for the production of rice, maize, cassava, cotton, ginger, fish,
onion, cocoa, soya beans and sesame, compared with ₦67.24 billion and 204,796
farmers in the preceding period. Furthermore, a total of 1,061,892 hectares of land were
cultivated, compared with 605,279 hectares in the second half of 2020, reflecting an
increase of 75.44 per cent. Repayments under the Programme amounted to ₦15.47
billion in the review period, compared with ₦19.28 billion in the preceding period, a
decrease of 19.76 per cent.
2.4.1.4 Accelerated Agriculture Development Scheme
The sum of ₦1.50 billion was disbursed in the first half of 2021, compared with ₦2.94
billion in the second half of 2020. There was no repayment in the two periods as the
projects were under moratorium. The projects financed with the disbursement included
cassava and rice.

2.4.1.5 Paddy Aggregation Scheme
The sum of ₦4.17 billion was released for a project in the review period, compared with
₦0.50 billion released for a project in the second half of 2020. The financing enabled
small and medium-scale rice millers to procure paddy for all-year round rice production.
There was no repayment during the review period due to moratorium granted compared
with ₦51.81 billion repaid in the second half of 2020.
2.4.1.6 Maize Aggregation Scheme
The sum of ₦0.35 billion was released for two (2) projects in the first half of 2021,
compared with ₦0.20 billion released for one (1) project in the second half of 2020 under
the scheme. There was no repayment as all facilities were under moratorium.
2.4.1.7 National Food Security Programme
In the review period, the sum of ₦45.99 billion was disbursed for 11 projects, compared
with zero disbursement in the preceding period. Repayments totaled ₦12.84 billion at
end-June 2021, compared with ₦2.36 billion at end-December 2020, indicating a 444.07
per cent increase.
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
2.4.2 Small and Medium Enterprises & Industrial Policy Support
2.4.2.1 Micro, Small and Medium Enterprises Development Fund
In view of the important contribution of the MSMEs to job creation, financial inclusion
and poverty reduction, the seed fund for the Micro, Small and Medium Enterprises
Development Fund (MSMEDF) was increased from ₦200.00 billion to ₦1.00 trillion in
2020. The sum of ₦50.00 million was disbursed during the first half of 2021, compared
with zero disbursement in second half of 2020. Repayments during the review period
stood at ₦2.91 billion, compared with ₦1.68 billion in the second half of 2020, reflecting
an increase of 73.21 per cent.
2.4.2.2 Agribusiness/Small and Medium Enterprises Investment Scheme
In the review period, ₦9.79 billion was disbursed for 1,067 projects, compared with
₦62.70 billion for 15,724 projects in the first half of 2021. These changes indicated
decreases of 84.39 and 93.21 per cent in value and number of projects, compared with
the second half of 2020. Repayments in the review period amounted to ₦20.91 million,
compared with ₦102.89 million in the second half of 2020.
2.4.2.3 Small and Medium Enterprises Credit Guarantee Scheme
During the review period, there was no activity under this scheme which was created to
guarantee credit to small and medium scale enterprises by participating financial
institutions. However, cumulative guarantees stood at ₦4.25 billion for 88 projects.
2.4.2.4 Creative Industry Financing Initiative
In the first half of 2021, the sum of ₦70 million was disbursed for 21 projects, compared
with ₦1.64 billion for 151 projects in the second half of 2020. This reflected a decrease
of 95.73 per cent compared, with the preceding period. The sum of ₦62.89 million was
repaid in the first half of 2021, compared with ₦33.14 million in the second half of 2020.
2.4.2.5 Targeted Credit Facility
During the period under review, the sum of ₦144.93 billion was disbursed for 323,654
projects compared with ₦134.68 billion for 319,051 projects during the second half of
2020. These changes reflected increases of 7.61 and 1.44 per cent in value and number
of projects respectively. There was no repayment as all the facilities were under
moratorium.
2.4.2.6 Nigeria Youth Investment Fund
The Fund was introduced in the second half of 2020, in collaboration with the Federal
Ministry of Youth and Sports Development, as a built-in strategy in response to youth
unemployment challenges in Nigeria. During the period under review, the sum of ₦2.81
billion was disbursed, compared with ₦191.70 million in the second half of the 2020.
There were no repayments as the facilities were under moratorium.
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
2.4.3 Real Sector Policy Support
2.4.3.1 Real Sector Support Facility
The sum of ₦6.36 billion was repaid in the review period, compared with ₦5.57 billion
in the preceding period. There was no disbursement in the periods under review.
2.4.3.2 RSSF - Differentiated Cash Reserve Requirement
The sum of ₦164.81 billion was disbursed for 32 projects in the first half of 2021,
compared with ₦167.03 billion for 41 projects in the second half of 2020, reflecting
decreases of 1.33 per cent and 21.95 per cent in terms of total amount disbursed and
the number of projects funded, respectively. The sum of ₦7.12 billion was repaid in the
first half of 2021, compared with ₦28.35 billion in the preceding period, indicating a
decrease of 74.89 per cent.
2.4.3.3 COVID-19 Intervention for the Manufacturing Sector
In the review period, the sum of ₦35.03 billion was disbursed for 16 projects, compared
with ₦152.57 billion for 26 projects in the second half of 2020, indicating decreases of
77.04 per cent. All the facilities were still under moratorium.
2.4.3.4 Healthcare Sector Intervention Facility
The sum of ₦25.16 billion was disbursed for 23 projects in the first half of 2021,
compared with ₦50.68 billion for 56 projects in the second half of the 2020. These
represented a decrease of 50.37 and 58.93 per cent in value and number of projects,
respectively, during the period under review; the sum of ₦5.93 billion was repaid for 3
projects in the first half of 2021, compared with ₦3.39 billion in the second half of 2020.
2.4.3.5 Healthcare Sector Research and Development Intervention (Grant)
Scheme
The scheme was introduced in March 2020, and the sum of ₦145.40 million was
disbursed for five (5) projects in the first half of 2021 to support Research and
Development in the Healthcare Sector. This was to encourage the development and
production of indigenous drugs and vaccines against COVID-19 and other infectious
diseases.
2.4.3.6 Textile Sector Intervention Facility
In the review period, the sum of ₦0.39 billion was disbursed for one (1) project,
compared with ₦4.00 billion for two (2) projects in the second half of 2020. This
represented a decrease of 90.25 per cent in the period under review. The cumulative
disbursement stood at ₦91.65 billion.
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
2.4.3.7 CBN-BOI Industrial Facility
This intervention was introduced to support the industrial sector. In the first half of 2021,
there was no disbursement compared with ₦200.00 billion disbursed, through BOI, for
60 projects in the second half of 2020.
2.4.3.8 Presidential Fertilizer Initiative
This initiative was designed to resuscitate Nigeria’s moribund fertilizer plants to boost
food production towards achieving food security, shore up domestic manufacturing
capacity and reduce fertilizer importation to conserve foreign exchange. Although there
was no disbursement during the review period, the sum of ₦3.0 billion was repaid,
compared with ₦3.5 billion in the second half of 2020.

2.4.3.9 Solar Connection Facility
The Solar Connection Facility was introduced to provide affordable and clean off-grid
energy to a larger share of households and businesses; enhance national energy
sufficiency; and address the energy distribution and transmission challenges in Nigeria.
The sum of ₦7.0 billion was disbursed in the first half of 2021, for the procurement and
installation of 100,000 solar home systems across the country.

2.4.3.10
Intervention Facility for the National Gas Expansion Programme
This facility was introduced to support the production of Compressed Natural Gas and
Liquefied Petroleum Gas as well as stimulate investments in the gas value chain. The
sum of ₦15.20 billion was disbursed in the first half of 2021.

2.4.3.11
Shared Agent Network Expansion Facility
The long-term facility was designed to enable licensed super agents and Mobile Money
Operators (MMOs) to expand capacity and increase access points across the country.
A sum of N500 million was disbursed for one (1) project and ₦401.28 million was repaid
in the first half of 2021. There was no disbursement and repayment in the second half
of 2020.
In the first half of 2021, agent acquisition was 215,617, compared with the target of
100,000, representing 116% performance. In addition, total agent roll-out stood at
776,661, while 858,964 accounts/wallets were opened at Agent locations.

2.5 Export Policy Support
2.5.1 Non-oil Export Stimulation Facility
The sum of ₦59.09 billion was released for 14 projects in the first half of 2021, compared
with ₦2.00 billion for two (2) projects in the second half of 2020. The significant increase
was to support local companies to enhance their capacities and take advantage of the
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
opportunities presented by the Africa Continental Free Trade Agreement (AfCFTA). The
sum of ₦11.98 billion was repaid, compared with ₦0.76 billion in the preceding period.

2.5.2 Export Development Facility
The Facility was established to improve exporters access to concessionary finance to
expand and diversify the non-oil export basket. Total disbursement under the project
stood at ₦100.00 billion. However, there was no disbursement or repayment in the first
half of 2021, compared with ₦50.00 billion disbursed in the second half of 2020.
2.6 Energy Policy Support
2.6.1 Power and Airline Intervention Fund
In the review period, the sum of ₦0.89 billion was disbursed, compared with ₦3.03 billion
in the preceding period. This represented a decrease of 70.62 per cent, compared with
the second half of 2020. The sum of ₦20.20 billion was repaid in the first half of 2021,
compared with ₦22.01 billion in the second half of 2020.

2.6.2 Nigerian Electricity Market Stabilisation Facility
Nigerian Electricity Market Stabilisation Facility (Phase 2) was introduced in January
2021 to provide liquidity support to the DisCos9, to enable them to meet their financial
obligations to the upstream market participants (NBET10 and TCN11). Under this phase,
in the first half of 2021, the sum of ₦120.29 billion was disbursed under a 24 months
moratorium.
Under Phase 1, the sum of ₦189.19 billion was disbursed for 11 projects, compared
with zero disbursement in the preceding period. In the first half of 2021, the sum of
₦11.91 billion was repaid, compared with ₦10.78 billion in the second half of 2020.
2.6.3 Nigeria Bulk Electricity Trading – Payment Assurance Facility
During the review period, the sum of ₦88.99 billion was disbursed to NBET Plc, through
the BOI, compared with ₦85.58 billion in the second half of 2020, representing an
increase of 3.98 per cent.

9 Distribution companies (DisCos)
10 Nigeria Bulk Electricity Trading (NBET)
11 Transmission Company of Nigeria (TCN)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
2.6.4 National Mass Metering Programme
In the first half of 2021, the sum of ₦21.69 billion was disbursed, compared with ₦14.35
billion in the second half of 2020, reflecting an increase of 50.87 per cent. All the facilities
were under moratorium.
2.7 Institutional Support and Financial Inclusion
2.7.1 National Collateral Registry
The performance indicators of the National Collateral Registry (NCR) trended upwards,
indicating increased lending against movable assets offered as collateral by individuals
and MSME borrowers in the review period.
A total of 36 financial institutions registered 33,423 financing statements valued at ₦6.23
trillion and US$155.54 million in respect of 34,268 borrowers, compared with 27,689
financing statements valued at ₦228.55 billion, US$82.60 million and £27,350.00
registered in favour of 40,932 borrowers in the second half of 2020. In addition, a total
of 43,386 searches were conducted at end-June 2021, compared with 30,414 searches
at end-December 2020, reflecting an increase of 42.65 per cent.
TABLE 2:10 NUMBER AND VALUE OF FINANCING STATEMENTS ON THE NATIONAL COLLATERAL REGISTRY
PORTAL FROM JAN 1ST TO JUN 30TH, 2021
Debtor
Type
Number of Financing
Statements
Number
of
Borrowers
Currency
Value
of
Financing
Statements
Individual
31,594
32,111
NGN
68,153,651,468.48
USD
13,500,000.00
Large
Business

NGN
6,125,981,425,135.45
USD
138,524,987.18
Medium
Business

NGN
28,076,392,093.76
USD
3,511,709.68
Micro
Business

NGN
1,718,782,499.23
Small
Business

NGN
7,728,844,038.05
Total
33,423
34,268
NGN
6,231,659,095,234.97
USD
155,536,696.86

Further analysis showed that 30 financial institutions registered a total of 16,419
financing statements in respect of 16,663 women-owned enterprises, representing
49.09 and 48.62 per cent respectively, of the number of financing statements and the
number of borrowers.
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 2:11 NUMBER AND VALUE OF FINANCING STATEMENTS REGISTERED IN RESPECT OF WOMEN AND
WOMEN-OWNED BUSINESSES ON THE NATIONAL COLLATERAL REGISTRY PORTAL FROM JAN 1ST TO JUN
30TH, 2021
Debtor Type
Number
of
Financing
Statements
Number
of
Womenowned
Enterprises
Currency
Value
of
Financing
Statements
Individual
16,097
16,274
NGN
13,986,585,453.61
Large Business

NGN
241,019,332.18
USD
3,800,000.00
Medium
Business

NGN
1,986,240,040.45
USD
124,064.68
Micro Business

NGN
528,376,144.30
Small Business

NGN
778,533,910.38
Total
16,419
16,663
NGN
17,520,754,880.92
USD
3,924,064.68

From inception to end-June 2021, a total of 130 financial institutions had registered
158,540 financing statements valued ₦8,208.70 billion, US$1.59 billion, €0.11 billion
and £27,352.00. An analysis of these figures showed that 64,556 financing statements
(40.70 per cent), valued at ₦167.94 billion and US$0.04 billion were registered in
respect of women-owned enterprises by 93 financial institutions.

2.7.2 Financial Inclusion
In the review period, banks continued to render services through channels such as ATM,
POS, Agent locations and mobile Apps.

Using the Bank Verification Number (BVN) count to estimate the number of new
entrants into the banking system, a total of 2,932,844 new BVNs were issued in the
review period, f which, 1,344,117 were female, compared with 3,445,413 of which
1,810,465 were female in the preceding period. This brought the total number of BVNs
issued to individuals to 48,719,908 from inception.

At end-June 2021, under the Shared Agent Network Expansion Facility (SANEF), a total
of 776,661 Agents were registered, of which 215,617 were on-boarded between
January and June 2021, compared with 192,160 in the preceding period. This increased
on-boarding has resulted in improved access points per capita, as 500 Agents served
100,000 adults in the first half of 2021, compared with 323 Agents per 100,000 adults
in the second half of 2020. Furthermore, a total of 858,964 accounts/wallets were
opened at agent locations in the first half of 2021.

However, the number of DMB branches serving 100,000 adults decreased marginally
to 4.22 at end-June 2021, compared to 4.50 per cent at end-December 2020. Similarly,
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
the number of MFB branches serving 100,000 adults decreased to 1.61 at end-June
2021 from 2.8 per cent at end-December 2020.

2.8 Summary and Outlook for Development finance Interventions
Overall, the Bank’s development finance interventions continued to support sectors of
the economy adversely affected by the COVID-19 pandemic to ensure seamless flow
of credit to the economy. The interventions improved liquidity in the system, created and
retained jobs, sustained households’ income and consumption, and supported
economic recovery. The Bank will continue to provide appropriate support to sectors of
the economy in line with its developmental objectives.


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
3 REGULATORY AND SUPERVISORY ACTIVITIES
3.1 3.1
Financial Soundness Indicators

3.1.1 3.1.1 Asset-Based Indicators
3.1.1.1 3.1.1.1 Non-Performing Loans to Gross Loans
The Bank sustained its regulatory measures with positive impact on the quality of banks’
assets in the period under review. The ratio of non-performing loans (NPLs) to gross
loans decreased to 5.70 per cent at end-June 2021, from 6.02 per cent at endDecember 2020.

FIGURE 3.1 BANKING INDUSTRY NPLS TO GROSS LOANS

3.1.1.2 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 1.60 percentage points to
20.98, from 22.58 per cent in the second half of 2020. Similarly, the ratio of core liquid
assets to short-term liabilities declined by 1.80 percentage points to 30.78 per cent in
the review period, compared with 32.58 per cent at end-December 2020. This was due
largely, to the sustained implementation of the LDR12 policy which encouraged lending
to the real sector and households.


12 Loan-to-Deposit Ratio (LDR)

End Jun. 2020
End Dec. 2020
End Jun. 2021
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 3.2 BANKING INDUSTRY LIQUIDITY INDICATORS

3.1.1.3 Banking System Real Estate Loans Indicators
The indicators of banks’ exposure to the real estate market decreased during the review
period. In this regard, the ratio of residential real estate loans to total gross loans
decreased by 0.04 percentage point to 0.24, from 0.28 per cent in the second half of
2020. Also, the ratio of commercial real estate loans to total gross loans declined by
0.16 percentage point to 2.80 per cent in the review period, compared with 2.96 per cent
at end-December 2020.
FIGURE 3.3 BANKING INDUSTRY REAL ESTATE INDICATORS

3.1.2 Capital-Based Indicators
The solvency of the banking industry improved as the regulatory capital to risk-weighted
assets increased to 16.46 per cent at end-June 2021, from 15.05 per cent at endDecember 2020. Similarly, the regulatory tier-1 capital to risk-weighted assets

End Jun. 2020
End Dec. 2020
End Jun. 2021
Residential real estate loans to total gross loans
Commercial real estate loans to total gross loans

End Jun. 2020
End Dec. 2020
End Jun. 2021
Liquid assets (core) to total assets*
Liquid assets (core) to short-term liabilities*
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
increased to 13.07 per cent at end-June 2021, from 12.76 per cent at end-December
2020. The ratios were well above the regulatory thresholds.
FIGURE 3.4 BANKING INDUSTRY CAPITAL ADEQUACY INDICATORS


The soundness of the banking system improved as the ratio of non-performing loans
net of provisions to capital for the industry declined to 30.42 at end-June 2021, from
32.73 per cent at end-December 2020. The improvement was due largely, to the
capitalisation of a portion of the 2020 financial year earnings.
FIGURE 3.5 NON-PERFORMING LOANS NET OF PROVISION TO CAPITAL RATIO


End Jun. 2020
End Dec. 2020
End Jun. 2021
Capital to risk-weighted assets*
Tier 1 capital to risk-weighted assets*

End Jun. 2020
End Dec. 2020
End Jun. 2021
%
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
3.1.3 Income and Expense Based Indicators
The ratio of interest margin to gross income increased to 58.71 per cent during the
review period, from 56.43 per cent at end-December 2020. However, the ratio of noninterest expenses to gross income increased to 72.57 per cent at end-June 2021, from
61.59 per cent in the preceding half.
The ratio of personnel expenses to non-interest expenses declined to 28.09 per cent at
end-June 2021, from 29.37 per cent at end-December 2020.

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

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*

Residential real estate loans to total gross loans

Commercial real estate loans to total gross loans

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

2. Capital Based Indicators

*FSIs are computed based on IMF-FSI Manual.

3.2 The Banking Industry Stress Tests
3.2.1 Solvency Stress Test
3.2.1.1 Baseline Position
The baseline CAR, LR and NPL ratios in the period under review were 15.46, 41.30 and
5.70 per cent respectively, while ROA and ROE stood at 1.21 and 39.14 per cent
respectively, at end-June 2021.

FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 3:2 BANKING INDUSTRY BASELINE SELECTED KEY INDICATORS

CAR
LR
NPLs
ROA
ROE
Jun 2021 (%)

Dec 2020 (%)

Percentage Points Change


FIGURE 3.6 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 was above the regulatory
requirement of 10 per cent as at end-June 2021.

TABLE 3:3 CREDIT DEFAULT SHOCKS


Dec '17
Jun ' 18
Dec '18
Jun' 19
Dec' 19
Jun' 20
Dec' 20
Jun' 21
Per cent
Banking Industry CAR
Single Factor Shocks
Jun 2021
Dec 2020
Baseline CAR
15.46
14.83
10% NPLs increase
15.06
14.33
15% NPLs increase
14.87
14.08
20% NPLs increase
14.67
13.83
30% NPLs increase
14.27
13.32
50% NPLs increase
13.45
12.29
100% NPLs increase
11.35
9.60
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
The banking industry showed resilience to credit concentration risk as the CAR
remained above the 10.0 per cent regulatory threshold under stress test scenarios 1, 2
and 3 (Table 3:4)
TABLE 3:4 CREDIT CONCENTRATION RISK

FIGURE 3.7 CREDIT CONCENTRATION RISK


3.2.1.3 Sectoral Credit Concentration Risk
A breakdown of banking industry total credit by sector at end-June 2021 showed that
the Oil and Gas sector accounted for 24.30; Manufacturing, 16.58; Government, 15.48;

13 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 2021
Dec 2020
Baseline CAR
15.46
14.83
Single Factor Credit Concentration Shocks
Scenario 1
Five largest corporate credit facilities shifted from passthrough13to sub-standard (10%)
14.89
14.22
Scenario 2
Five largest corporate credit facilities shifted from substandard to doubtful (50%)
14.03
13.29
Scenario 3
Five largest corporate credit facilities shifted from doubtful
to lost (100%)
12.56
11.70
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
General, 5.70; General Commerce, 6.53; Finance and Insurance, 5.56; and Others,
25.85 per cent.

FIGURE 3.8 SECTORAL CONCENTRATION OF CREDIT


The results of the stress test showed that the banking industry withstood up to 50.0 per
cent shock to oil and gas exposures as the post-shock CAR stood at 10.12 per cent.

TABLE 3:5 STRESS TEST ON OIL AND GAS EXPOSURES

Industry CAR (%)
Baseline CAR
15.46
30% Default on total exposure to Oil and Gas
14.77
50% Default on total exposure to Oil and Gas
10.12

3.2.1.4 Interest Rate Risk
The stress test on the net position of 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 from 15.46 to
14.39 per cent.


Oil and Gas
Manufacturing
Government
General
Gen Comm
Finance and Insurance
Others
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 3.9 IMPACT OF INTEREST RATE SHOCKS ON CAR


3.2.2 Liquidity Stress Test14
The stress test result revealed that after a one-day run scenario, the liquidity ratio for
the industry declined to 32.60 per cent, from the 41.34 per cent baseline position.
Similarly, under the 5-day and 30-day scenarios, the liquidity ratio for the industry
declined to 15.09 and 10.69 per cent, indicating N3.12 trillion and N 3.82 trillion liquidity
shortfalls, respectively.

FIGURE 3.10: INDUSTRY LIQUIDITY RATIOS AT PERIODS 1-5 AND CUMULATIVE 30-DAY SHOCKS


14 Liquidity stress tests were conducted at end-Jun 2021 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.
15.46
14.93
14.39
Baseline CAR
500 bps downward shift in yield
curve
1000 bps downward shift in yield
curve

Pre-Shock
After Day 1
After Day 2
After Day 3
After Day 4
After Day 5
After cum 30
days
Dec-20
Jun-21
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 3:6 LIQUIDITY STRESS TEST RESULTS (POST-SHOCK)
Scenario
Banks with
Liquidity Ratios (LR) <
30%
June 2021
Dec 2020
(27 DMBs)
June 2021
(28 DMBs)
LR (%)
Shortfall to 30% LR
threshold
(N’ billion)
Test 1.1: Implied Cash Flow Test

Day 1

32.60
Nil
Day 2

28.54
360.23
Day 3

24.33
1,325.70
Day 4

19.88
2,242.12
Day 5

15.09
3,122.37
Implied
Cash
Flow
Test
(30
Days)

10.69
3,816.54

3.2.3 Maturity Mismatch
The industry baseline assets and liabilities maturity profile at end-June 2021 showed an
excess of N2.35 trillion assets over liabilities. Further analysis revealed that only the
short-end of the market (≤90 day bucket) was adequately funded. However, four and
six banks were not adequately funded in the ≤30-day and 31-90 day buckets
respectively.
TABLE 3:7 MATURITY PROFILE OF ASSETS AND LIABILITIES AT END-JUNE 2021
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
36,651.74
38,997.66


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 3:8 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

N ‘billion
No of
banks
with
mismatch

≤30 days
13,201.12

7,905.40

≤30 days
13,201.12

31-90 days
4,470.29

-902.69

31-90 days
4,470.29

91-180days
3,494.65

-1,163.83

91-180days
3,494.65

181365days
2,205.81

-2,398.39
181-365days
2,205.81

1-3 Years
1,631.76

-3,204.15
1-3 Years
1,631.76

Above

years
-1,057.03

-5,439.00
Above 3 years
-1,057.03

Total
23,946.61
-5,202.67
Total
23,946.61

Table 3.9 revealed that under Test 2A 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 N5.20 trillion and N7.67 trillion, respectively. These
indicated decreases of N0.13 trillion and N 0.1 trillion under the Test 2B and Test 2C
respectively, relative to end-December 2020 tests.

3.2.4 Contagion Risk Analysis
The contagion risk analysis depicted an increase in exposure and interconnectedness
through interbank placements and takings. The total exposure increased by 28.02 per
cent to ₦550.64 billion at end-June 2021, from ₦396.34 billion at end-December 2020.
Further analysis revealed that six banks accounted for ₦378.16 billion or 68.68 per cent
of total placements, while six banks also accounted for ₦433.88 billion or 78.80 per cent
of total takings. The result of the analysis of interbank placements and takings revealed
that it was within the safety corridor of the interbank market operations and there was
no threat to the financial system stability.

FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 3.11 NETWORK ANALYSIS BASED ON INTERBANK EXPOSURES


3.2.4.1 change placement to placer
Purple to Net takers


BOX 2: 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 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
Node colour representation
Blue = Placement only
Deep Blue= Net Placement
Red = Takings only
Purple = Net Takings
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
This 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 by 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 3:9 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

3.3 Supervision of Banks
3.3.1 Supervisory/ Surveillance Activities
In the first half of 2021, the Bank sustained its oversight of the banking system with a
view to promoting the safety, soundness, and stability of the financial system amidst
vulnerabilities occasioned by the pandemic.
3.3.2 Examination
The Joint CBN and NDIC Risk Assets Assessment Examination of 30 banks, comprising
22 commercial, six (6) merchant and two (2) non-interest banks, was carried out during
the review period. This was to review their risk assets and the adequacy of loan loss
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
provisions in preparation for the approval of their respective audited financial statements
for the year-ended December 31, 2020.
Also, the AML/CFT examination of the 30 banks covering the period April 1, 2020 to
May 31, 2021 was carried out, using the On-site Risk Assessment Methodology
(ORAM) tool, which was developed in-house, based on the IMF offsite risk assessment
tool. The examination involved the assessments of the ML/TF risks in the operations of
the banks and a review of the effectiveness of the mitigants in place to address the
risks.
Major findings of the AML/CFT examination included:

▪ Delivery channels: A marked increase in the use of e-delivery channels was
observed across the banks as more customers resorted to the use of those
channels following the outbreak of Covid-19. This development exposed the
banks to heightened risks of fraud, money laundering and cyber-attacks.
Consequently, banks were required to put in place adequate control measures
to mitigate the risks.

▪ Compliance function: Some banks failed to conduct the mandatory annual
compliance test required under Regulation 42 of the CBN AML & CFT Regulation
2013 (as amended) to test the effectiveness of the compliance function.

▪ Know Your Customer/Customer Due Diligence: Some banks were in breach
of Regulation 14 (1) of the CBN AML & CFT Regulation 2013 (as amended) on
the documentation requirements for account opening in the on-boarding of new
customers as they failed to carry out Customer Due Diligence (CDD) and
Enhanced Due Diligence (EDD) for High-Risk Customers.

▪ Suspicious Transaction Reporting: Failure to update the Transaction
Monitoring software to reflect the parameters for emerging risks was observed in
some institutions, leading to the non-identification and/or reporting of some
suspicious transactions to the NFIU.


▪ Politically Exposed Persons (PEPs): Some banks neglected to carry out
Enhanced Due Diligence on PEPs, leading to inadequate monitoring of
transactions on their accounts.

Appropriate recommendations to address the observed inadequacies and sanctions
were imposed in line with extant laws and regulations.
3.3.3 Foreign Exchange Examination
The routine foreign exchange examination of 26 Authorized Dealers (ADs), comprising
22 commercial and four (4) merchant banks, was conducted during the review period.
The examination, which covered the period April 1, 2020 to March 31, 2021, was aimed
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
at measuring compliance with extant foreign exchange regulations and the utilization of
foreign exchange acquired for eligible transactions.
Significant findings included the utilisation of cash deposits in excess of USD10,000 for
telegraphic transfers, transfer of funds from domiciliary accounts to third parties without
stating the purpose of the transfer, use of domiciliary account balances to fund the
importation of goods without Form M registration and utilisation of foreign exchange by
small import customers in excess of the quarterly permissible limit of U$20,000.
Others were non-compliance with the Net Open Position Limit (NOPL), breach of
Foreign Currency Trading Position, non-repatriation of export proceeds, importation of
prohibited items with Form Q and non-utilisation of autonomous/interbank funds within
the deadline of 72 hours of receipt. Appropriate regulatory actions have been taken to
address the observed infractions.
3.3.4 Non-Interest Banks
The total assets of Non-Interest banks (NIBs) stood at N319.84 billion at end-June 2021,
representing 0.6 per cent of total banking industry assets, while their total deposits and
total credits at N238.43 billion and N142.51 billion, represented 0.7 per cent and 0.65
per cent of the industry totals respectively.
In the first half of 2021, a non-interest bank with regional authorisation was licensed,
bringing the total number of non-interest financial institutions (NIFIs) to eight (8),
comprising three (3) banks, three (3) MFBs and two (2) non-interest windows.

3.3.5 Supervision of Domestic Systemically Important Banks
During the review period, the Bank sustained its oversight of the five (5) Domestic
Systemically Important Banks (D-SIBs) to ensure the safety and soundness of the
financial system. At end-June 2021, the D-SIBs accounted for N31.16 trillion or 58.45
per cent of industry total assets of N53.32 trillion; N20.60 trillion or 61.29 per cent of
total deposits of N33.61trillion; and N12.45 trillion or 56.49 per cent of the industry
credits of N22.04 trillion. All the D-SIBs complied with the minimum capital adequacy
and liquidity ratio requirements of 15 per cent and 30 per cent respectively.

3.3.6 Asset Management Corporation of Nigeria
The target examination of the Asset Management Corporation of Nigeria (AMCON) was
conducted during the review period. The exercise focused on the collateral register of
AMCON’s Eligible Bank Asset (EBA) portfolio, recoveries, disposal of assets and the
financial condition of the Corporation. The examination revealed that the Corporation
recovered a total of N69.20 billion in cash, compared with its half-year target
of N44.26 billion and annual target of N111.01 billion. The recovery represented 166.06
per cent of the half-year target or 53.28 per cent of the target for the whole year.

The carrying value of AMCON’s liabilities stood at N5.81 trillion at end-June 2021, with
AMCON Notes outstanding balance of N3.97 trillion and Loan (Debenture) of N500
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
billion accounting for 76.94 per cent of the liabilities. The Notes are due to mature on
December 27, 2023 while the Loan is due for redemption on December 30, 2022. The
carrying value of the Corporation’s assets stood at N986.055 billion at end-June 2021.
The assets represented 16.97 per cent of the liabilities arising from deferred income
and Payables from participating institutions.

The operations of the Banking Sector Resolution Cost Fund (BSRCF) were suspended
in the review period following the expiration of the ten-year tenor of the BSRCF at endDecember 2020, as stipulated in Section 61 (b) of the AMCON Amendment Act 2015.
Consequently, the BSRCF had a nil balance at end-June 2021. However, in line with
the provisions of the Act, a Bill for the extension of the tenor of the BSRCF by five years
has been submitted to the National Assembly for its consideration and approval.

3.3.7 Cross Border Supervision of Nigerian Banks
3.3.7.1 Foreign Subsidiaries of Nigerian Banks
The number of offshore banking subsidiaries of Nigerian banks was 67 at end-June
2021, same as the position at end-December 2020. There was, however, changes in
the number of representative offices from four (4) to three (3) following the grant of a
“no objection” to United Bank of Africa to transform its representative office in the United
Arab Emirates (UAE) to a branch.

3.3.7.2 Onsite Examination of Offshore Subsidiaries of Banks
The limitations enforced by the pandemic on international travels affected the conduct
of on-site examination of the offshore subsidiaries of Nigerian banks during the review
period. The Bank, however, introduced measures to ensure that the operations of the
subsidiaries continued to be properly monitored. In this regard, banks were required to
highlight in their monthly returns the impact of COVID-19 on their subsidiaries and the
measures taken to mitigate them. Also, the Bank pioneered a remote risk based
supervision (R-RBS) examination system, which was utilised in the examination of
offshore banking subsidiaries of a bank. The major goal of the exercise was to achieve
the consolidated supervision of all the components of the Group, despite the challenges
imposed by the pandemic.

3.3.8 Credit Risk Management System
The total number of credit facilities on the CRMS database stood at 26,292,020,
comprising 25,102,910 individual and 810,292 non-individual borrowers at end-June
2021, reflecting an increase of 21.63 per cent, compared with 21,616,075 at endDecember 2020. The total number of facilities with outstanding balances stood at
5,233,014, comprising 5,102,910 individuals and 130,104 non-individuals at end-June
2021, indicating a significant increase of 32.65 per cent from 3,944,882 at endDecember 2020.
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
The strict enforcement of the CBN Regulatory Guidelines on CRMS has led to enhanced
compliance by banks as signified by improved credit records (Table 3:10)
)
TABLE 3:10 CREDIT RISK MANAGEMENT SYSTEM
Borrowers from the Banking Sector (Commercial, Merchant and Non-Interest Banks)
Description

December 2020

June 2021

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
3.3.9 Credit Bureaux
The routine examination of the three (3) credit bureaux conducted during the review
period revealed that their capital remained above the regulatory minimum of N500
million. Their subscriber base witnessed significant expansion following the sign-on of
unconventional 15 credit providers. Similarly, the credit records of the bureaux

15 These include; mobile network operators, courier companies, Asset Management companies, Brokerage firms, Cooperative
societies, Insurance Companies, Non-Governmental Institutions, etc.

FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
experienced a steady growth, consistent with credit expansion in the economy (Table
3.13).

TABLE 3:11 CREDIT BUREAUX RECORDS


3.4 Supervision of Other Financial Institutions
3.4.1 Examination of Other Financial Institutions
On-site examination was restricted to 258 OFIs because of second and third waves of
COVID-19 during the period under review. The exercise covered Risk-Based
Supervision (RBS) of 152 BDCs and 25 Systemically Important Other Financial
Institutions (SIOFIs), comprising 13 MFBs, 8 PMBs and 4 FCs as well as special
examination of 61 MFBs on “Watch List”, 12 PMBs and 8 FCs with critical regulatory
issues.
The RBS examination of the 13 systemically important MFBs revealed that the
composite risk ratings of four MFBs were “Moderate”, seven “Above Average” and two


As at June 30,

As at December
31, 2020
As at June 30,

As at December
31, 2020
As at June 30,

As at
December 31,

Number of credit records


Number of subscribers
1,535
1,463

1,242
1,159

Value of Credit Facilities
N32.99 Trillion
N30.117 Trillion
₦31.124 trillion N28.974 trillion
N28.274
N27.699 Trillion

Number of Data Subjects


Capital Base (₦'M)

CRC Credit Bureau
CreditRegistry
First Central Credit Bureau
S/N
Parameters
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
High”. The composite risk ratings of the eight PMBs were one “Low”, three “Moderate”,
two “Above Average” and two “High” while those of the four FCs were one “Low”, one
“Above Average” and two “High”.

The outcome of the RBS examination of the BDCs revealed the composite risk ratings
of Low (1), Moderate (4), Above Average (78) and High (63). Appropriate regulatory
measures were taken to address the observed deficiencies.
The “existence” check conducted on the 61 MFBs on “Watch List” to assess their capital
levels, in line with the final re-capitalisation deadline of April 2022, revealed that 12
MFBs were in operation, 33 had closed shop, 11 were inactive and 5 were undergoing
restructuring. The average capital adequacy ratio, liquidity ratio and portfolio-at-risk of
the 12 MFBs in operation were negative 50.7, 161.9 and 74.0 per cent respectively.
Four of the MFBs met the minimum capital adequacy ratio of 10%, nine met the
minimum liquidity ratio of 20%, while one MFB operated within the maximum PortfolioAt-Risk of 5%.

The Target Examination of the 12 PMBs revealed that 11 were in operation while one
was undergoing restructuring. The adjusted capital and capital adequacy ratios of the
11 PMBs were below the minimum regulatory requirements while four met the minimum
liquidity ratio of 20%. Similarly, the Target Examination of the eight FCs revealed that
two were “Sound”, one “Technically Insolvent”, two inactive while three were engaged
in non-permissible activities. Consequently, appropriate regulatory measures have
been taken.
TABLE
3:12 EXAMINATION
OF
SYSTEMICALLY
IMPORTANT
OTHER
FINANCIAL
INSTITUTIONS
OFIs
Composite Risk
Rating (CRR)
NPL
Earnings Rating
Capital
Rating
Prudential and Soundness
Analysis
Primary
Mortgage
Banks
1 = Low
3 = Moderate

=
Above
Average
2 =High
Average
NPL
Ratio of 77.9
per cent was
above
the
regulatory
maximum of 30
per cent.
1 = Acceptable
4 = Acceptable

=
Needs
Improvement

3 = Strong

=
Acceptable

=
Needs
Improvement

Average CAR and liquidity
ratio of 55.7 per cent and
129.5 per cent,
respectively are above the
regulatory minimum of 10
and 20 per cent.
Finance
Companies
1 = Low
1= Above Average
2 = High
Average NPL of
17.7 per cent
was above the
regulatory
maximum

per cent.
1 = Strong

=
Needs
Improvement
2 = Weak

1 = Strong

=
Acceptable
1 = Weak

Average CAR of 19.4 per
cent was above the 12.5
per
cent
regulatory
requirement.
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
Microfinance
Banks
4 = Moderate
7=Above Average
2 = High
Average
PAR
was
25.9%,
above
the
regulatory
maximum of 5%
5 = Acceptable

=
Needs
Improvement
2 = Weak

5 = Strong

=
Acceptable

=
Needs
Improvement
1 = Weak

Average CAR and liquidity
ratio were 27.6 and 57.4
per
cent,
respectively.
These were above the
regulatory
minimum
benchmarks of 10 and 20
per cent.

3.5 Other Developments in the Financial System
3.5.1 AML/CFT & Corporate Governance
3.5.1.1 Automation of AML/CFT Processes
To improve the AML/CFT regime, banks commenced the rendition of Foreign Currency
Report (FTRs), Politically Exposed Persons (PEP) report and Three-tiered KYC returns
via the AML/CFT Data Rendition and Processing System (ADRAPS) during the review
period.
3.5.1.2 Corporate Governance Scorecard
Scorecard assessments were conducted on eight (8) banks to ascertain their level of
compliance with the CBN Code of Corporate Governance for Banks and Discount
Houses during the review period. The exercise was to assess and ensure that sound
corporate governance practices were entrenched in the banking industry. The result of
the assessment revealed that of the eight (8) banks, five (5) were rated “Acceptable”;
two (2), “Needs Improvement”; and one (1), “Weak”.
3.5.1.3 Guidelines on Shared Services Arrangements
To ensure cost efficiency, leverage on existing expertise and maintain consistency
throughout the group, the Bank issued Guidelines for Shared Services Arrangements
for Banks and Other Financial Institutions during the review period. The regulation
covers general principles, approved services, governance, transfer pricing and
regulatory reporting for holding companies, among others.
3.5.1.4 Enrolment of Other Financial Institutions on the Credit Risk Management
System and the Global Standing Instruction Platform
To improve repayment culture, reduce incidences of default in the banking industry and
widen the credit information base, the Bank commenced the enrolment of OFIs on the
Credit Risk Management System and GSI platforms to extend the coverage of the two
applications to all regulated financial institutions under the Bank’s purview.
3.6 Complaints Management and Resolution
In pursuance of the Bank’s mandate of promoting a sound financial system in Nigeria,
the Complaints Management Division of the CPD provides and ensures an effective
redress mechanism for resolution of complaints by consumers against financial
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
institutions. In that regard, the complaints management and resolution statistics for the
review period showed a good degree of improvement in its performance compared to
the previous review period. The division had 1,215 outstanding complaints at endDecember 2020, indicating a decrease of 14.81 per cent, compared with 1,035 at endJune 2021 and received 1,973 fresh complaints from financial services consumers,
compared with 2,577 fresh complaints in the second half of 2020, indicating a decrease
of 23.44 per cent. The complaints were related mainly to excess and unauthorised
charges, frauds, account management, ATM dispense errors and funds transfers. A
further breakdown showed that 1,930 complaints or 97.82 per cent were against banks,
while 43 or 2.18 per cent were against Other Financial Institutions.
In the review period, total claims in local and foreign currencies amounted to N16.84
billion and US$102,553.17, compared with N31.52 billion only in the second half of
2020. Financial institutions were directed to refund the sum of N8.43 billion and
US$53,805.62 to customers, compared with N839.93 million only in the second half of
2020.

FIGURE 3.12 NUMBER OF COMPLAINTS (JAN - JUN 2021)

JAN
FEB
MAR
APR
MAY
JUN
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
FIGURE 3.13 NUMBER AND PERCENTAGE OF COMPLAINTS BY CATEGORY (JAN – JUN 2021)

The number of complaints resolved and closed marginally increased in the review
period by 0.60 per cent to 2,169, compared with 2,156 in the second half of 2020. A
total of 1,317 were resolved and 852 were closed (Figure 3.14).

FIGURE 3.14 DISTRIBUTION OF COMPLAINTS RESOLVED AND CLOSED


-100


JANUARY
FEBRUARY
MARCH
APRIL
MAY
JUNE
NO OF CASES RESOLVED
NO OF CASES CLOSED
TOTAL
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
4 THE PAYMENTS SYSTEM
4.1 Developments in the Payments System
The Bank continued to implement policies and initiatives aimed at improving the safety
and efficiency of the Payments System.
4.1.1 Bank Verification Number Operations and Watch-list
The BVN 16 remained a credible tool that assists financial institutions and law
enforcement agencies, amongst others, in reducing frauds and other financial crimes in
the financial system. At end–June 2021, BVNs count stood at 48.71 million, reflecting
an increase of 6.33 per cent, compared with 45.80 million at end-December 2020. The
number of accounts linked with BVNs was 105.96 million while the number of watchlisted BVNs stood at 12,425 at end-June 2021.

4.1.2 Categorisation of Payments System Participants
The Bank issued a new licensing framework which offers greater clarity for new and
existing market participants, given the significant evolution and innovation in the
Nigerian Payments System. The framework streamlines Payments System Participants
(PSPs) according to permissible activities into four broad categories: Switching and
Processing, Mobile Money Operations (MMOs), Payment Solution Services (PSSs),
and Regulatory Sandbox. The framework does not permit an entity to hold licenses
across the different categories except under a holding company structure. Also, only
MMOs are permitted to hold customer funds. The new licensing regime is effective July
1, 2021.


16 Bank Verification Number
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 4:1 CATEGORIES OF PAYMENTS SYSTEM PARTICIPANTS
S/N
Category
Permissible activities
Minimum
Shareholders’
Funds
1 Mobile Money Operators
E-Money issuing, Agent recruitment and
management,
wallet
creation
and
management, pool account management
N2bn
2 Switching and Processing
Switching, Card Processing, Transaction
clearing and Settlement Agents services,
Non-Bank Merchant Acquirers, Third Party
Processors,
Merchant
Acquiring
and
settlements
service,
Settlement
agents’
services
N2bn
3 Payments Solution Services
(PSS)
Payment processing gateway and portals,
Payment solution/application development,
Merchant
Service
aggregation,
and
collections.

POS Terminal deployment and services, POS
Terminal ownership, PTAD, Merchant/agent
training and support

Agent recruitment and management

N250m
4 Regulatory Sandbox*
Testing of products and services in a
controlled environment
Not Applicable
*This category does not require an operational licence
The table below depicts the number and various licence types of the Payments
System Participants during the review period. The total number of licensed
institutions decreased from 123 at end-December 2020 to 112 at end-June 2021,
following the revocation of the licences of seven (7) PSPs and the decision to
allow DMBs operate Mobile Money Wallets without MMO licence.


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 4:2 PAYMENTS SYSTEM PARTICIPANTS
License –Type
Number
End-December 2020 End-June 2021
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

4.1.3 Examination of Payments System Participants
During the review period, examination of 20 PSPs17 was conducted based on the
volume and value of transactions carried out and combination of licenses held. The
outcome of the exercise revealed the urgent need for the:
i.
Expansion of payment infrastructure.
ii.
Strengthening of cyber-resilience.
iii.
Stringent implementation of IT and data security measures, and
iv.
Strengthening of KYC requirements.
As part of the ongoing licence renewal process of PSPs, the assessment of 17 PSPs
was carried out during the review period.
4.1.4 Open Banking
The Bank issued the Regulatory Framework on Open Banking in Nigeria on February
17, 2021. The framework regulates open banking practices and enables the provision

17 Payment System Participants (PSPs)
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
of innovative and customer-centric financial services, by leveraging the Application
Programming Interface (API) standards across the Banking Industry.

4.1.5 Regulatory Sandbox
In view of increasing consumer appetite for payment solutions and emerging disruptive
technology in the financial services space, the Bank issued the Framework for
Regulatory Sandbox Operations in Nigeria in January 2021 to ensure new, more flexible
ways of engaging with the industry. The Regulatory Sandbox is a formal process for
firms to conduct live tests of innovative products, services, delivery channels, or
business models in a controlled environment, with regulatory oversight. The
implementation of the framework will promote effective competition, financial innovation,
improve customer experience, and encourage financial inclusion.

4.1.6 Nigeria Cheque Standards and Cheque Printers Accreditation Scheme
The revised Nigeria Cheque Standards (NCS), and Nigeria Cheque Printers
Accreditation Scheme (NICPAS) were fully implemented with effect from April 1, 2021,
with only cheques that conform with the new standard permissible in the clearing
system. The implementation of the NCS is to enhance the safety and efficiency of
cheque clearing system with the introduction of Quick Response (QR) code on cheques,
amongst other features.
The Bank accredited one cheque printer, bringing the total number of accredited cheque
printers to eight (8) during the review period.

4.1.7 Central Counterparty
As part of efforts to deepen the Nigerian financial markets, the Securities and Exchange
Commission (SEC) for the first time approved the establishment of two central
counterparties (CCP): NG Clearing Limited, and FMDQ Clear (a subsidiary of FMDQ
Group). The emergence of the CCPs would enhance achievement of delivery versus
payment (DVP), mitigate gridlock and counterparty risks, and engender efficient service
delivery and healthy competition.

4.2 Payments System Statistics and Trends
4.2.1 Large Value Payments
The volume and value of inter-bank fund transfers through the Real Time Gross
Settlement (RTGS) System decreased to 141,592 and N35,695.95 billion at end-June
2021, from 148,707 and N36,195.11 billion at end-December 2020, reflecting decreases
of 4.78 and 1.38 per cent, respectively.

FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
4.2.2 SWIFT Customer Security Programme
The Bank continued to implement the following measures to minimize risks associated
with SWIFT operations:
•
Daily Validation Report (DVR) to highlight large transactions, detect unusual
transaction flow and identify new counter parties. This report is done daily,
usually 24 hours after transaction day. This process is carried out to check for
discrepancies in transactions by confirming that the amounts routed are same
with the amounts that were credited to the beneficiary accounts. Discrepancies
are rare; however, when they occur, the originating office is notified to reconcile
and update their records as required.
•
Creation of a secure zone for SWIFT operators to separate SWIFT environment
from the general IT environment.
•
Screening of all outgoing messages in line with SWIFT sanction screening tool.

4.2.3 Retail Payments


4.2.3.1 Cheque Clearing
The volume and value of cheques cleared decreased to 2,253,064 and N1,596.82
billion, in the first half of 2021 from 2,489,348 and N1,660.38 billion in the second half
of 2020, representing a decrease of 9.49 and 3.83 per cent, respectively. The
decreases were due to customers’ growing preference for alternative payment
channels.
4.2.3.2 Electronic Transactions
The volume and value of electronic transactions decreased by 32.20 and 57.16 per cent
to 4,363,843,350 and N188,022.11 billion during the review period, compared with
6,436,148,824 and N438,934.17 billion at end-December 2020. The decrease reflects
the seasonality in economic activities.


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
TABLE 4:3 ELECTRONIC TRANSACTIONS

4.3 Risks in the Payments System
The Nigerian payments system remained safe and resilient despite heightened cyber
threats from increased number of users, digitalization of financial services, and
telecommuting. To assist operators mitigate the threats, the Bank issued two
frameworks; the Nigerian Payments System, Risk and Information Security
Management Framework, and Risk-Based Cyber-Security Framework and Guidelines
for Deposit Money Banks and Payment Service Providers. The frameworks help to
ensure that systems which inherently create interdependencies among financial
institutions do not create systemic risks and provide a risk-based approach to managing
cybersecurity risk.


Payment
Channel
Number of Active
Terminals
Number of Transactions
% Change
Volume
Increase/
(decrease)
Value N’ Billion
% Change
Value
Increase/
(decrease)
Dec
Jun
Jul-Dec 2020
Jan-Jun 2021
Jul-Dec 2020
Jan-Jun 2021

ATMs

POS

Mobile
Money
N/A

Online
Transfers
(Internet/W
eb)
N/A-

Mobile App


USSD


Direct
Debit


ACH/
NEFT


Total


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
5 KEY RISKS TO THE FINANCIAL SYSTEM
5.1 Credit Risk

[


Risk Rating (Medium Risk, Trending downwards)

Credit risks abated during the review period due to the effects of Global Standing
Instruction (GSI), increased repayment by obligors, and other policy measures such as
regulatory forbearances by the Bank. Consequently, Industry Non-Performing Loans
(NPLs) ratio declined to 5.70 per cent at end-June 2021, compared with 6.02 per cent
at end-December 2020.
Credit risks are expected to remain moderate and on a downward trajectory. However,
the lingering effects of the Covid-19 pandemic and uncertainties in sectors with high
proportions of industry credits such as Oil and Gas continue to pose risks to the financial
system.

5.2 Liquidity Risk
Risk Rating (Low Risk, Stable)
The banking industry is robust and resilient to short-term liquidity shocks as the average
industry liquidity ratio remained above the regulatory threshold of 30.00 per cent.
Industry liquidity risk is expected to remain low and stable. Nonetheless, rollover risk
and asset-liability mismatches continue to pose funding risks.

5.3 Market Risk

Risk Rating (Medium Risk, Trending Up)
The weighted average OBB rate increased significantly by 15.37 percentage points to
16.39 per cent at end-June 2021, compared with 1.02 per cent at end-December 2020.
Similarly, interbank call rates increased by 15.62 percentage points to 16.87 per cent at
end-June 2021, compared with 1.25 per cent at end-December 2020, reflecting tighter
liquidity within the banking system.
Average savings rate declined by 0.23 percentage point to 1.81 per cent at end-June
2021, compared to 2.04 per cent at end-December 2020. Maximum lending rate
increased by 0.74 percentage point to 29.05 per cent at end-June 2021, compared to
28.31 per cent at end-December 2020. The widening spread between the deposit rate
and the maximum lending rate reflects the high cost of intermediation in the banking
sector.
Exchange rate pressures persisted during the period under review, resulting from
demand pressures and supply constraints in the FX market. This was exacerbated by
the risks to the external reserves, including the buildup in external borrowing, and the
impact of the mutating Covid-19 variants on oil demand.
FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
In the debt market, there was an upward shift in the yield curve, indicative of increased
investor confidence. However, the equity market witnessed a 6.15 per cent decline in
market capitalisation, reflecting the heightened uncertainties induced by the resurgence
of Covid-19.
Overall, market risk is expected to maintain an upward trend in 2021, given the
persisting pressures on interest rates, exchange rates and inflation, as well as the
likelihood of FPI reversals.

5.4 Operational Risk

Risk Rating (High Risk, Trending up)


During the review period, operational risks faced by financial institutions were largely
related to rising incidents of fraud and forgeries, increased insider threats and thirdparty risks, as well as security challenges across the country. Industry reports indicated
that the top three Fraud and Forgeries vectors, based on incident count, were ATM,
Web, and Internet Banking, while the top three, based on volume, were Internet
Banking, Mobile and ATM respectively.
Operational risks are expected to remain high with an upward trend for the rest of 2021.
However, with the implementation of robust incident response, disaster recovery,
business continuity plans, and information sharing networks amongst institutions, the
industry is well positioned to mitigate these risks.

5.5 Cybersecurity Risk

Risk Rating (High Risk, Trending up)
During the period under review, there was a significant increase in the number of
cybersecurity incidents, some of which included: social engineering, especially for the
vulnerable segment of users; unauthorised access to information;
ransomware attacks; heightened insider threats and third party risks; threat of cyberattack on payments system infrastructure; and Web based fraud.
Cyber-threats are expected to remain high, with an upward trend, in 2021, in line with
global trend.

5.6 Macroeconomic Risk
Risk Rating (High Risk, Downward)
Macroeconomic risks remained high, but with a downward trend driven largely by the
gradual resumption of economic activities in the country. However, slower-thanFINANCIAL STABILITY REPORT – JUNE 2021

Classified as
anticipated rollout of vaccines, virus mutations could dampen outlook. Also, fiscal
sustainability issues arising from dwindling revenue, increasing debt profile remained
major threat to macroeconomic stability. The crystallization of downside risks and the
consequent decrease in the level of the reserves would exert pressure on the exchange
rate, leading to higher inflation as imports become more expensive. Despite these, the
modest recovery in output coupled with low inflationary pressure in the review period is
expected to moderate macroeconomic risk.


FINANCIAL STABILITY REPORT – JUNE 2021

Classified as
6 OUTLOOK
The outlook for the Nigerian economy in the near-term is optimistic on account of the
rebound in economic activities and base effect, although uncertainties remain. The
expansion in output is expected to be buoyed by supply chain improvements, increased
credit delivery, rising crude oil revenue and the rebound in output of some sectors
significantly impacted by the pandemic.
The monetary and fiscal interventions in the real sector, especially in Agriculture, are
expected to improve the supply chain and moderate inflationary pressure in the nearterm. However, risks to the outlook include pressure on exchange rate, heightening
insecurity and hikes in Premium Motor Spirit (PMS) price, among others.
Accretion to external reserves is expected to improve in the near-term as oil export and
capital inflow increase, although downside risks persist. Furthermore, the Bank’s policy
on diaspora remittances and over-invoicing, as well as improved receipts from
Petroleum Profit Tax (PPT) and the Petroleum Industry Act are expected to buoy
reserves accretion.
The Bank would continue to enhance its regulatory tools as well as evolve appropriate
policies measures towards ensuring the soundness and stability of the banking. Also,
with the gradual return to normal economic activities, it is expected that the financial
soundness indicators of the banking industry would continue to remain positive.
The Bank would sustain its proactive supervisory approach, through regular stress
testing exercise and application of the Early Warning System tools to assess risk and
vulnerabilities in the banking system.
The overall economic outlook remained cautiously optimistic, given the proactive policy
measures adopted by the Bank towards mitigating the adverse impact of the pandemic
and enhancing the resilience of the financial system.


FINANCIAL STABILITY REPORT – JUNE 2021

ACKNOWLEDGEMENTS
LIST OF MAJOR CONTRIBUTORS

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

I. S. Tukur
Ditto

H. J. Audu
Ditto

J. A. Mohammed
Ditto

A. Sylvanus-Dannana
(Mrs)
Ditto

U. L. Suleiman
Ditto

L. Mohammed
Ditto

O. I. Adebowale
Development Finance Department

V.U Oboh
Monetary Policy Department

Yakubu Jibrin
Research Department

A. Shebe
Banking Supervision Department

Audu Salihu
Statistics Department

Iranade P. Akibolaji (Mrs)
Risk Management Department

F.E. Oduniyi
Financial Markets Department

V. A. Martins
Other
Financial
Institutions
Supervision
Department

M. M. Farouk
Reserve Management Department

O. T. Nuhu
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 (PhD)
Director, Financial Policy and Regulation Department