Africa Press-Nigeria:<\/p>\n
* Fitch predicts 20% hit to Nigerian bank revenues this year<\/p>\n
* Central bank measures exacerbate lending, FX shortage woes<\/p>\n
* Economy faces COVID-19, oil price shock double whammy<\/p>\n
By Chijioke Ohuocha and Karin Strohecker<\/p>\n
ABUJA\/LONDON, July 28 (Reuters) – Nigeria\u2019s banks are expected to take a big hit to revenues and face rising borrowing costs this year as central bank measures to support the naira currency squeeze lenders already hit by fallout from coronavirus and the oil price shock, analysts say.<\/p>\n
Banks in Africa\u2019s largest economy – a mainstay for equity and fixed income frontier market investors – have learned to navigate challenges in a country that has long struggled with dollar shortages and multiple exchange rates.<\/p>\n
But the prospect of anaemic growth, dwindling oil revenues, declining remittances and dollar shortages exacerbated by the central bank\u2019s latest action aimed at curbing naira liquidity and currency speculation are putting pressure on lending by banks and the quality of existing assets.<\/p>\n
The central bank has sucked as much as 900 billion naira out of the local banking system since raising the cash reserve ratio (CRR) by 5% to 27.5% in January, according to analysts\u2019 calculations.<\/p>\n
\u201cGeneral sentiment in the markets is that CRR debits are carried out quite close to FX auctions to prevent the banks from presenting large ticket FX demands at auctions,\u201d said Nkemdilim Nwadialor at Tellimer Capital.<\/p>\n
Those debits also hamper wider lending, going against central bank measures of lowering banks\u2019 loan to deposit ratios, she said. Central bank data showed credit to the private sector in April dropped by nearly two-thirds from end-2019.<\/p>\n
\u201cBanks are dealing with slow growth, fall in lending, a lack of forex in the market and asset quality issues,\u201d said Mahin Dissanayake, senior director EMEA bank ratings at Fitch.<\/p>\n
He expects banks\u2019 revenues to drop at least 20% this year, though he did not expect any to make a loss.<\/p>\n
Some banks have already indicated they expect a hit. In April, mid-tier lender Fidelity Bank warned 2020 profits would drop by 15%.<\/p>\n
Bankers said lenders were relying on existing customers to weather the storm as new lending looked risky with the economy expected to tip back into recession.<\/p>\n
Fitch predicts impaired loan ratios will rise sharply in 2020 with Nigerian banks the most exposed to stress in the oil sector compared to their peers in emerging markets elsewhere.<\/p>\n
Nwadialor at Tellimer expected a \u201csignificant pick-up\u201d of non-performing loan ratios from 6.6% in the first quarter to an average of 10% for the full year – double the central bank\u2019s benchmark.<\/p>\n
Some banks have already announced plans to tackle this. Mid-tier lender FCMB plans to complete a restructuring of half its loan book at the end of April. A central bank policy maker predicted last month that banks would restructure over a third of loans.<\/p>\n
Moody\u2019s warned in a note that dollar shortages would intensify over the next 12-18 months – a period when 49% of banks\u2019 $7 billion foreign-currency borrowing matures, leaving them vulnerable.<\/p>\n
Yields on dollar bonds issued by Nigerian banks – a proxy for borrowing costs – have retreated from the peaks scaled in the midst of the oil and coronavirus rout. Yet for lenders such as Zenith Bank, Fidelity Bank or Access Bank, the yields are still at least double the level from mid-March.<\/p>\n
\u201cForeign currency borrowing will be more expensive at a time when banks must refinance almost half of their borrowings,\u201d Moody\u2019s analysts said.<\/p>\n","protected":false},"excerpt":{"rendered":"
Africa Press-Nigeria: * Fitch predicts 20% hit to Nigerian bank revenues this year * Central bank measures exacerbate lending, FX shortage woes * Economy faces COVID-19, oil price shock double whammy By Chijioke Ohuocha and Karin Strohecker ABUJA\/LONDON, July 28 (Reuters) – Nigeria\u2019s banks are expected to take a big hit to revenues and face […]<\/p>\n","protected":false},"author":62,"featured_media":3212,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[24,15],"tags":[1453],"class_list":["post-27970","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-economy","tag-coronavirus-in-nigeria"],"yoast_head":"\n