The credit account balance of Nigerian banks is worrisome, the International Monetary Fund (IMF) has said.

"In terms of our indicators of potential concern, Nigeria has a credit account balance which is relatively high,’’ the Financial Counselor and the Director of the IMF’s Monetary and Capital Markets Department, Jose Vinals, said.

The official of the multilateral body raised the concern based on indicators from a report on the financial stability of some emerging economies at the ongoing 2009 Spring Meetings of the World Bank/IMF.

Vinal, who fielded questions from reporters after a brief on the IMF Global Financial Stability Report, said that the growth of credit in Nigeria had been relatively fast for the past few years.

He added that there were lendings not fully covered by the deposit base of the banks.

"The growth of credit has been relatively fast for the past few years and it has some lending, which is not fully covered by the deposit base. We are not passing judgments on Nigeria; we can only call for financial policies.

" We are only saying that it is a country in Africa which has some areas of potential concern that can be addressed in the other three areas we have highlighted in our report,’’ he said.

Local analysts had raised questions about the quality and volume of credit held by Nigerian banks, but the Central Bank of Nigeria (CBN) insists that the banks’ credit portfolios are within healthy limits.

The CBN Governor, Professor Chukwuma Soludo, said recently in Lagos that banks’ total risk asset at end of February 2009 was N12.78 trillion. The non-performing risk assets as end of February stood at 4.74 per cent.

As for the industry’s total loans as at end of February, he put the figure at N7.8 trillion , while the non-performing loans as a percentage of total at that time was 6.2 per cent.

In reaction to the report, of the CBN spokesman Mr. Festus Odoko, told The Nation last night that it was ironic that the IMF was saying that Nigerian banks were giving too much credit when Nigerians were accusing the banks of not lending enough.

He said even in their own countries they were urging banks to give more credit, but "here they are telling us that our banks are giving too much credit."

Odoko said the report was not making any new point which had not been explained by CBN.

The three areas of IMF’s concern as indicated in the report were in current account balance, average real credit growth over the last five years and loan/deposit ratio.

A table in the report, entitled Macro and Financial Indicators in selected emerging market countries, indicated that the current account balance of banks in Nigeria was - 9.0 per cent of the GDP.

It also indicated that net external position vis-à-vis Bank for International settlement (BIS) reporting banks was 10. 3 per cent of the GDP.

According to the report, the average real credit growth over the past five years on year-on-year percentage was 34.2 per cent.

The report explained that the cut off values were - 5 per cent for GDP for current account balance. Net external liabilities to BIS reporting banks was above 10 per cent of GDP and the average real growth of credit to the private sector greater than 30 per cent year on year.

On the need for more government intervention in banks, Vina said the unprecedented policy response in both the financial and macro-economic domain was gradually beginning to restore market confidence.

"Continued decisive and effective action is needed to preserve and strengthen these first signs of improvement, ‘’ he said.

Vina, however, said that there was a need for clear conditions on public sector interventions and a map out of an exit strategy when the banks become stabilised.

Five African countries were also listed in the selected emerging countries on the table and four of the countries were highlighted on potential areas of concern, namely: Ghana, Egypt, South Africa and Uganda.

Ghana, according to the report, had a current account balance of -10.9 per cent of the GDP, while South Africa had -5.8 per cent and Uganda, - 6.2 per cent of the GDP.

South Africa had a loan/deposit ratio of 1.2 per cent. Only the Nigerian banks were highlighted in three areas of potential concern.

Egypt was on the list, but it was not highlighted for potential concern in any of the three areas where Nigeria, Ghana, Uganda and South Africa featured.