Moody’s Investors Service, a credit rating and research agency, said Nigeria could risk weak investor and consumer confidence over political uncertainty and social unrest.
The global rating agency, in its 2019 outlook on Africa – banks and sovereigns, identified Nigeria alongside South Africa and Tanzania as one of the African countries bedevilled with such “an ever-present” challenge.
As a result, Moody’s said Nigeria’s growth would be more subdued at 2.3 percent as “more stable oil prices will drive economic acceleration” in the country.
Nigeria goes to the polls next February to decide its President among ruling President Muhammadu Buhari, former Vice President, Atiku Abubakar, the presidential flag bearer of the opposition party and 57 other aspirants. The country is also expected to conduct elections for governors as well as state and federal lawmakers.
Growth in Africa’s largest economy stood at 1.81 percent year-on-year in the third quarter of 2018, according to data by the National Bureau of Statistics (NBS) and has been projected to hit 1.9 percent in 2018 and 2.3 percent in 2019 by the International Monetary Fund (IMF).
In spite of these, the rating agency sees banks showing strong financial resilience in 2019 but warned that tightening global financial conditions are a key downside risk.
It said although its outlook for African banks was stable, risks are tilted to the downside even though external shocks such as falling commodity prices, drought, or an escalation of global trade wars, could hurt African corporates and their ability to repay debt.
According to the outlook, rising US interest rates leading to capital outflows across emerging markets, in conjunction with rising government debt and currency depreciation could significantly harm banks’ loan quality and access to foreign currency.
Higher oil prices and partial liberalisation of the foreign-exchange market have eased pressures on “unhedged” borrowers and normalised foreign-currency liquidity, according to the credit agency.
“Capital buffers are strong for the bigger banks, but weaker for smaller banks,” Moody’s forecasted adding that it expects most rated banks to maintain stable profitability, build up their capital buffers and retain ample local currency funding in 2019.
“Asset risks will remain high, while we also expect some renewed tightening of foreign currency liquidity; banks are, however, in a better position to withstand pressures following efforts to reduce foreign-currency lending.”
