The outlook for the Nigerian banking system stays secure, as banks’ international foreign money liquidity dangers average as a consequence of rising oil prices and an extra liberal international trade coverage, says Moody’s Investors Service in a report printed at this time.
The report, “Banking System Outlook — Nigeria; Liquidity risks have eased but earnings pressure and loan quality risks remain,” is accessible on www.moodys.com. The analysis is a replace to the markets and doesn't represent a ranking motion.
Despite the stabilisation in banks’ international foreign money funding and liquidity profiles, Moody’s expects banks’ earnings to return underneath stress. Capital metrics may even decline marginally over the 12 to 18 month outlook interval. Additionally, asset high quality will stay weak, however an additional deterioration in mortgage efficiency shall be marginal as working situations slowly enhance.
“Operating conditions for the Nigeria’s banks will continue to gradually improve over the next 12 to 18 months, but remain challenging. Nigeria’s growth prospects remain vulnerable to global oil prices, as crude oil will remain the nation’s largest export commodity and its main generator of foreign currency for the foreseeable future,” the Vice President and Senior Credit Officer, at Moody’s, Akin Majekodunmi, mentioned.
Moody’s forecasts a restoration in actual gross home product (GDP) progress over the subsequent two years, up from zero.8 per cent final yr, serving to lending progress rise to round 10 per cent after a 15.four per cent contraction in 2017.
Nigerian banks’ profitability will nonetheless decline on account of decrease yields on authorities securities, in addition to a probable discount in revenue from derivatives. However, these pressures shall be partially offset by a restoration in mortgage progress and transaction revenue from the enlargement of digital platforms.
Meanwhile, nonperforming loans (NPLs), and related provisions within the banking system will enhance marginally in a delayed response to sluggish financial progress skilled final yr, and Moody’s expects them to vary between 15.5 per cent and 18 per cent of gross loans over the outlook interval.