Fitch Ratings has declared that Nigerian banks are operating in increasingly difficult conditions as this may result in a sharp deterioration of their profitability, asset quality, liquidity and capital ratios. Fitch in its report released weekend said “The sector outlook is negative in December. Gross Domestic Product, GDP figures for second quarter show weaker year-on-year growth of 2.4 per cent , down from 4 per cent in the previous quarter, the slowest quarterly growth rate for over 10 years.”
The volatile operating environment is highly important in determining ratings for all Fitch-rated Nigerian banks, keeping their Viability Ratings low, in the highly speculative ‘b’ category. Nigerian banks are highly exposed to their domestic market and the economic slowdown will affect their performance. According to Fitch “Nigeria’s oil sector growth slowed in second quarter, 2015 and non-oil growth was just 3.5 per cent , down from 5.6 per cent in first quarter , 2015.
Part of this slowdown was caused by temporary fuel shortages, which caused industrial production and manufacturing output to contract. Lower oil prices, reduced government spending and restrictions on foreign exchange availability are also taking their toll on performance across the economy. Positively, agricultural output, construction, telecommunication services, internal trade and financial services continued to grow.”Read more