-Moody’s maintains its stable outlook for Nigeria’s banking system, which is supported by resilient capital buffers and stable deposits bases
– The banks’ challenges from asset risks and profitability should ease as the economy improves
WED, JUNE 19 2019-theG&BJournal- The outlook for Nigeria’s banking system remains stable, reflecting resilient capital buffers and stable deposit bases, and high asset risks should ease as the economy strengthens, Moody’s Investors Service said in a report published today.
“Nigerian banks’ asset risk and profitability will remain key rating challenges, but we expect these challenges to gradually decline in 2020 as the economy picks up,” said Peter Mushangwe, Analyst at Moody’s. “Banks’ funding and liquidity profiles will remain stable thanks to solid deposit bases.”
Loan quality pressures will ease but remain banks’ main weakness. Nonperforming loans (NPLs) will decline to 7%-8% in the next 12-18 months from 11.7% at the end of 2018 – still a high level. Higher oil prices will constrain new NPL formation while high loan-loss reserves will allow banks to write off some of their bad debts. These credit positives will be moderated by lingering risks from high loan concentrations and high delinquency levels.
Moody’s expects Nigeria’s real GDP to expand 2.3% in 2019 and 2.8% in 2020, up from 1.9% last year, but well below the level required to improve living standards. Lending growth will recover in the second half of the year following a contraction in 2018, but it will remain subdued and will not appreciably boost banking revenue.
|twitter:@theGBJournal|email: info@govandbusinessjournal.com.ng|
