Moody Sees Nigeria’s GDP Growth Next Year

4 years ago
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Moody's: Negative Outlook For Sub-Saharan African Sovereigns, Debt Costs To  Intensify - TrendingNG | Latest local and international news, politics,  sports, education and entertainment
 Moody’s Investors Service has predicted that economic activity will rebound in Nigeria, with real Gross Domestic Products  growth of 2.1 per cent in 2021, and 3.1 per cent in 2022, following a 1.9 per cent contraction last year.
In its latest report,Moody said the  current high oil prices, if sustained, would further boost economic activity; however, the economy would remain sensitive to oil price movements.
It ,however, said the country’s banking system outlook remains negative, reflecting expectations of rising asset risk and weakening government support capacity over the next 12 to 18 months.
The report titled ‘Moody’s – Outlook on Nigeria’s banking system remains negative as asset risk will increase’ showed major risks.
Major highlights of theproblem loans were expected to rise to eight per cent to 10 per cent of total loans, from six per cent in 2020, as support measures put in place in 2020 to sustain financial stability were withdrawn;
“Profitability would weaken as revenue growth falls and loan losses rose”
It added that  local currency funding and liquidity would remain robust, and foreign-currency shortages would ease.
An Analyst at Moody’s and the co-author of the report, Peter Mushangwe, said, “Nigerian banks’ loan quality will weaken in 2021 as coronavirus support measures implemented by the government and central bank last year, including the loan repayment holiday, are unwound.
“The negative outlook also captures the weakening capacity of the government of Nigeria to support the country’s banks in case of need, as reflected by the negative outlook on the government’s credit rating; on the other hand, Nigerian banks hold robust capital buffers and foreign-currency shortages will ease.”
The report  added that  banks in Africa’s biggest economy faced higher asset quality risks as coronavirus support measures were withdrawn amid large single-name and sectoral concentrations, and as banks held a large volume of foreign currency loans.
It stated that banks balance sheets were also burdened by large volumes of stage two loans
It added:“We estimate that between 40 per cent to 45 per cent of banking loans were restructured in 2020, easing pressure on borrowers following the outbreak of the pandemic.Still, the government’s capacity to support banks may weaken, as it has an extremely low revenue base, which has remained below 10 per cent of Gross Domestic Product since 2015.However, the government’s willingness to provide support to large banks in the event of a crisis and to sustain financial stability will remain high.”
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