Adeduntan urges banks to improve loan monitoring against NPLs build-up

The Managing Director/Chief Executive Officer of First Bank, Dr. Adesola Adeduntan, has urged financial institutions in the country to improve the monitoring of their customers’ loans in order to prevent the build-up of Non-Performing Loans (NPLs) in the industry.

Adeduntan equally enjoined business owners and their financiers to approach the New Year in a collaborative relationship in order to overcome anticipated headwinds in the economy.

He gave the admonition in a recent interview with THISDAY.

“To prevent rising NPLs, businesses and their bankers will have to collaborate more and ensure timely flow of information to prevent surprises.

“Banks on their part will have to improve monitoring of their loan portfolio to quickly identify early warning signals for attention before a full-scale loan deterioration.

“Overall, businesses and their bankers must approach 2023 with a partnership mindset to ensure that a win-win outcome is achieved despite the anticipated macroeconomic challenges,” the First Bank CEO said.

Speaking on the IMF’s recent recently warning that 2023 would be tougher than 2022 for much of the global economy, Adeduntan said with slowing growth and elevated inflation rates, the sustainability of foreign debts, especially for developing nations, was likely to call for a re-evaluation by lenders given the increased likelihood of default.

He said: “When this is juxtaposed with the higher interest rate environment at which these debts are likely to be refinanced, you will observe a scenario where further strain is exerted on the debt repayment capacity of these economies.

“However, this situation does not necessarily translate to an automatic economic doom for developing nations. The actual impact on each developing economy will depend on the economy’s level of fiscal discipline and revenue-generating capacity.

“Developing nations, who are able, in the short term, to increase revenues either from taxes or sale/refinancing of idle/sub-optimal assets will be able to negotiate reasonable refinancing terms from lenders and prevent further economic turmoil.

“Nonetheless, all concerned nations need to take the issue of debt sustainability more seriously by limiting fiscal wastages, reducing inefficiencies, growing revenues, and aggressively working down unsustainable debt-to-GDP levels that may worsen the impacts of external shocks.”

The Star