Market News

The ongoing depreciation of the naira may negatively impact Nigerian banks, a Senior Director of credit ratings agency, Fitch Ratings, Mahin Dissanayake, was reported by Reuters as saying yesterday. According to the news agency, Dissanayake, who stated this during a press briefing in Accra yesterday, predicted that the next 12 to 18 months will be “very difficult” for African banks as widespread inflation, currency devaluations and interest rate hikes sweep the region. 

The Fitch official, however, said that regional banks are expected to maintain their profitability in the face of shocks of medium severity. African economies have struggled over the last year in the face of external forces including Russia’s war in Ukraine, a global economic downturn and lingering effects from the COVID-19 crisis.

“These countries have global pressures as well as domestic pressures, so we think that the operating environment for banks is looking quite gloomy going forward,” Dissanayake said. “The opportunities for growth will certainly be limited … but the COVID-19 pandemic showed us that African banks can be resilient when faced with global shocks.”

Dissanayake said that Morocco is the country most likely to be affected by the economic slowdown in Europe, given its dependence on European trade and tourism. Nigeria, an importdependent country with a highly dollarised banking sector, is likely to experience increased import costs as the dollar strengthens, which corporate borrowers will struggle to pass on to customers, he said. Currency shortages are likely to pose challenges to Nigerian banks directly, while they may also see more loans to small businesses become impaired, Dissanayake said.