The Nigerian Deposit Insurance Corporation (NDIC) has said that the astronomical rise in online transactions including fraudulent transfers and withdrawals in 2014 was responsible for the stunted financial growth of the banking sector.
In its 2014 annual report for the banking sector, NDIC said the rate of fraud in the banking sector rose by 182.77 percent from 3,786 cases in 2013 to 10,612 cases as of December 2014, adding that the amount involved within the period under review increased by N3.81bn or 17.5 percent from N21.8bn to N25.61bn.
As a result of the increase in the level of the fraud in the industry, according to the report, the expected/actual loss rose from N5.76bn in 2013 to N6.19bn in 2014.
The report said, “The Deposit Money Banks reported 10,612 fraud cases in 2014 compared with 3,786 cases in 2013, representing an increase of 182.77 percent.
“In the same vein, the amount involved increased by 3.81bn or 17.5 per cent from 21.80bn in 2013 to 25.61bn in 2014.
“Also the expected/actual loss increased from 5.76bn in 2013 to 6.19bn in 2014. The increase of 7.57 per cent in expected/actual loss in fraud and forgeries was mainly due to the astronomical increase in the incidence of web-based (online banking), Automated Teller Machine and fraudulent transfer/withdrawal of deposit funds.”
On asset quality, the report said the banking industry recorded significant improvement in the level of its asset quality during the period under review.
It said, for instance, that the banking industry’s total loans and advances rose by 25.73 percent from N10.04trn to 12.63trn in 2014.
The report also revealed that the industry’s amount of non-performing loans increased by 10.26 percent from 321.66bn in 2013 to 354.84bn in 2014.
It said, “The banking industry non-performing loans to total loans ratio improved from 3.2 percent in 2013 to 2.81 percent in 2014 and was within the regulatory threshold of five percent.
“The observed improved asset quality could be explained by the improved process of loan underwriting as well as the continued purchase of non-performing loans by Asset Management Corporation of Nigeria.
“The banking industry liquidity risk was moderate during the period under review. The industry average liquidity ratio rose from 50.63 per cent in 2013 to 53.65 percent in 2014 showing an increase of 3.02 percent over the 50.63 percent in 2013.
“Individually, all the DMBs in the industry had liquidity ratios in excess of the minimum prudential requirement of 30 percent as at December 31 2014, indicating that all DMBs were sufficiently liquid.”
On deposit coverage, the NDIC report stated that there was a growth of 3.01 percent in deposit insurance coverage in the total number of depositors of DMBs between the end of 2013 and 2014.
It said the number of depositors fully covered in the 23 DMBs increased by 3.05 percent from 60,601,039 in 2011 to 62,447,952 in 2014, while the Deposit Insurance Fund grew by 20.88 percent from N508.06bn in 2013 to N614.16bn in 2014
By Patrick Aigbokhan