WATCH THE VIDEO HERE Credit ratings agency, Fitch has projected that non-performing loans of Nigerian banks will increase in 2024 on the back of high interest rates and inflation in the country. The agency stated this in its latest credit ratings report on Nigeria where it affirmed the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-‘ with a Positive Outlook. According to the firm, the loan books of the banking sector at 35% of assets in the sector by the end of 2023 are low. It stated, “Fitch expects the banking sector’s regulatory non-performing loans (end-1Q24: 5.1%) to increase in 2024 due to high inflation and interest rates. However, loan books are small (end-2023: 35% of banking sector assets).” The report further referenced the CBN’s increase in capital requirement for banks that is meant to be completed by the end of the first quarter of 2026 together with the amendment of the 2020 finance act which imposed a 70% windfall levy on banks’ foreign exchange gains in 2023 and Q1, 2024. It noted that these decisions will not lead to capital adequacy ratio breaches. Fitch in the report noted that it expected the MPR to rise again in the last quarter of 2024, alongside the ongoing use of prudential and operational tools like open market operations, with rates set near the MPR, aimed at improving the effectiveness of monetary policy transmission after prolonged financial repression. Nigeria’s inflation rate rose to 32.7% in September, reversing a two-month slowdown since July 2024, driven by higher petrol prices that pushed up transport costs. Food inflation for the month increased to 37.77% year-on-year, marking a 7.13 percentage point rise from 30.64% in September 2023.
High interest rate, inflation to increase non-performing loans of Nigerian banks – Fitch report
