The ability of Nigerian banks to face economic headwinds from lower energy prices varies though its economy remains attractive, Moody’s Investors Service said.
Moody’s Investors Service said the number of non-performing loans, those for which the borrower is not making payments, is on pace to increase to around 12 percent over the next year, compared with the 5 percent on the books for Nigerian banks as recently as December.
In terms of momentum, Moody’s said Nigeria has the potential to grow and attract investments even as militant activity in the oil-rich Niger Delta and lower crude oil prices threatens its overall economy.
Meeting during the weekend in Washington D.C. with the World Bank and International Monetary Fund, Nigerian Finance Minister Kemi Adeosun said the country was ready to take its place alongside leading global economies. Moody’s said the five major banks in Nigeria all face a varying degree of risk given the degree of volatility.
“Despite shared credit challenges, there are differences among the banks in terms of their respective abilities to withstand weak economic growth and volatile monetary conditions,” Akin Majekodunmi, a Moody’s vice president, said in a statement.
All financial sectors have been affected by lower oil and gas prices, Moody’s said. The IMF said one of the positive factors for Nigeria is that debt is low, though structural reforms are needed to support stronger growth.
“The issue here is to have in place a policy framework, to have in place a very credible one at that, that will allow private sector, other financiers to step in, to allow – to give the time, the government the time to smooth the adjustment process,” Abebe Aemro Selassie, the director of the IMF’s African department, said in a statement.
The Nigerian economy has flirted with recession amid the dual strains from militants and lower crude oil prices. Oil contributed about 10 percent to the country’s gross domestic product.
Source: News Express.
*Photo shows Finance Minister Kemi Adeosun.