Fitch confirms viability of Nigerian banks

Jul 19, 2016

However, bank asset quality has continued to weaken.

Fitch Ratings has affirmed the Viability Ratings of all Nigerian banks, along with the Issuer Default Ratings of eight commercial banks in the country.

However, the credit rating agency said that bank asset quality has continued to weaken, with non performing loans (NPL) accounting for 6.2 per cent of all loans at the end of March 2016.

"NPLs in the oil sector are also rising, but most of the larger problem loans are being restructured," it said, adding that "sustained low oil prices and continuing production disruptions in the Niger Delta could cause industry NPL ratios to rise more dramatically."

Speaking at the recent Sixth African Petroleum Congress and Exhibition (CAPE VI) in Abuja, professor of economics from the University of Ibadan Adeola Adenikinju said that energy companies could face difficulties to repay their loans as they struggle with the recent drop in oil prices and the reduced global demand.

"If nothing is done there is that possibility of banks going bankrupt. Some of the banks are exposed to the energy sector, oil sector and electricity sector. Now, some of those companies are not producing and the interests on the loans are increasing, making it more difficult for them to service those debts," he said, quoted by Vanguard.

However, Dolapo Oni, energy specialist at Ecobank, said that today's situation is different from the 2009 financial crisis: "Some loans will certainly be restructured and payments rescheduled to reflect changes in the revenues of oil companies but today the banking sector is better capitalised, and banks know the hydrocarbon industry better."ADNFCR-2976-ID-801821974-ADNFCR