Nigerian banks may be worst hit by oil price plunge, coronavirus – Fitch Ratings

International credit rating agency, Fitch Ratings, has noted in its latest outlook for the Nigerian banking sector that banks across the country face acute threats from oil price slump and the vast impact of the coronavirus crisis on the economy.

Asset quality deterioration resulting from huge lending to the oil and gas industry is the gravest risk to Nigeria’s financial sector, the New York-based organisation said Wednesday.

Oil and gas accounts form the lion share of bank’s private sector lending, making up about 20% of total credit in 2019, the statistics office said two days ago.

At N219.47 billion, it posted the highest non-performing loan figure across all the sectors of the economy at the end of last year.

A statement from the agency says “operating environment risks inevitably rise in Nigeria when oil prices fall. Oil exports represent 95% of the country’s export revenue and strongly influence the broader economy. Falling oil revenue may also lead to further currency devaluation. Accordingly, the slump in oil prices raises the risk of a recession.”

Read also: Lockdown won’t affect transportation of fertiliser – FG

Fitch envisaged that the forbearance measures taken by the apex bank would provide succour to businesses and households while stimulating credit flow across the economy.

Recently, the agency lowered the Long-Term Issuer Default Ratings (IDRs) of three Nigerian banks from ‘B+’ to ‘B-‘ and included both the Viability Ratings and the IDRs of another group of ten Nigerian banks on the Rating Watch Negative list.

Fitch stated that “the resilience of banks’ asset quality, profitability and capital during the economic downturn will influence, among other considerations, how we resolve the Rating Watches.”

Join the conversation

Opinions

Support Ripples Nigeria, hold up solutions journalism

Balanced, fearless journalism driven by data comes at huge financial costs.

As a media platform, we hold leadership accountable and will not trade the right to press freedom and free speech for a piece of cake.

If you like what we do, and are ready to uphold solutions journalism, kindly donate to the Ripples Nigeria cause.

Your support would help to ensure that citizens and institutions continue to have free access to credible and reliable information for societal development.

Donate Now