Moody’s Predicts Negative Outlook For Nigeria, African Banks In 2020

Moody’s Investors Service – 2020 Outlook report has shown that banks in Nigeria, South Africa, Tunisia and Algeria will operate in a weakening operating condition due to increasing government debts.

Moody’s disclosed this in a report it published on Monday.

According to the report, 2020 outlook for African banks is negative, hence reflecting Africa’s weakening business environment.

According to the Senior Vice President at Moody’s, Constantinos Kypreos, “Weakening operating conditions are pressuring governments’ credit quality leading to a knock-on effect on banks through reduced business generation, slower credit growth and rising asset risk,”

The Body blamed rising in government debt as a major reason for the negative outlook.

The report also projected GDP of some African countries to remain below potential and insufficient to boost per capital income levels or increased economic resilience.

According to the report, asset risk will remain high as a result of rising government arrears, high loan concentrations, borrower friendly legal frameworks, and still evolving risk management and supervision capabilities.

Furthermore, banks will maintain high exposures to their respective countries, which links and caps their credit profiles to those of their governments.

However, it stated that most rated African banks will maintain high capital levels, and funding and liquidity in local currency will remain solid in most countries adding that Egyptian, Moroccan, Mauritian and Kenyan banks will be more resilient.

Meanwhile, Nigeria’s foreign debt alone according to Debt Management Office (DMO) is estimated at $22.08 billion in the second quarter of 2019, with the government seeking $30 billion loan which is not sustainable and may add to the threat highlighted in the Moody’s report.