Moody’s: Nigeria’s Banks Stabilize on Oil Price

Nigeria’s banking system is stabilizing, a result of an improving oil price and a more liberal foreign exchange policy, according to a report published today by Moody’s Investor Service.

The report — “Banking System Outlook — Nigeria; Liquidity risks have eased but earnings pressure and loan quality risks remain” — states the outlook for Nigerian banks is stable, following several years of rough waters for Nigerian banks. Just before the oil price began to plummet in 2014, indigenous Nigerian banks loaned heavily to Nigerian independent oil and gas companies seeking to expand their portfolios. The poor timing of the transactions I’m

“Operating conditions for the Nigeria’s banks will continue to gradually improve over the next 12 to 18 months, but remain challenging,” said Akin Majekodunmi, Vice President and Senior Credit Officer for Moody’s in a press release. “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.”

Moody’s forecasts a recovery in real GDP growth over the next two years, up from 0.8% last year, helping lending growth rise to around 10% after a 15.4% contraction in 2017.

The report highlights a forecasted recovery in real GDP growth over the next two years, which will also result in a growth of lending to about 10 percent after a 15.4 percent decline in 2017. Although continued stabilization remains the dominant theme of the report, the forecast also “expects bank earnings to come under pressure.”