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