Nairametrics| International ratings agency, Moody’s, has reaffirmed its stable outlook on the Nigerian banking system in its latest report. The report, which presents mostly good tidings for the future of banking in Nigeria, however still warns of some potent risks that good threaten the likely growth of the sector. Here are the highlights of the report.
- Overall, the banking system is expected to maintain stability due to the gradual disappearance of forex scarcity and the reawakening of the economy. With oil prices and economic activity gradually recovering in Nigeria, we expect banks’ dollar liquidity pressures to gradually ease over our outlook period,” the report opined.
- However, asset quality is expected to worsen as the low oil prices, currency depreciation and economic contraction of 2016 continues to take its toll
- Non-performing loans are also expected to rise to about 16% in 2017 from 14% in 2016, contributing to a worsened asset quality.
- Tangible common equity (TCE) is also expected to decrease from 14.7% end-2016 to 14.1% in 2017. This is due to increased loan-loss provisions and the effect of further expected naira depreciation on the balance of risk-weighted assets denominated in foreign currency
- More positive news from the report shows that the banking system should handle these losses pretty well as high yields on government securities and profits on open foreign currency positions, Moody’s stated.
- Finally, Moody’s stable outlook, the report noted, was partly hinged on the very high probability that the Federal Government would support banks in case of need to prevent the significant consequences of a bank collapse to both the payments system and the wider economy.