Moody’s Predicts Stable Outlook for African Banks

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Moody’s, one of the leading global rating agencies in has predicted a stable outlook for banks in Nigeria and other parts of the continent.

“While growth across Africa is recovering, it is still below potential. Our stable outlook for African banks reflects expectations of a slight acceleration in growth and stricter regulation that supports financial stability; but risks are titled to the downside,” Moody’s noted in a note obtained yesterday.

Moody’s in the report noted that the risks to the operating environment relate to the rising US interest rates leading to capital outflows across emerging markets, in conjunction with rising government debt and currency depreciation, could significantly harm African banks’ loan quality and access to foreign currency.

The report, however, stated that Nigeria has a stable outlook because of the improved foreign-currency liquidity and rising loan quality.
For banks in the continent generally, the report predicted that the financial institutions would show financial resilience.

It projected a mild recovery in economic growth, driven by relatively stable commodity prices, robust domestic demand and domestic policy adjustments.
It stated, “Stricter regulation and better supervision will also help address legacy governance issues and support banks’ financial stability. We view Egyptian, Moroccan and Mauritius rated banks as most resilient.
“Banks’ credit profiles remain sensitive to such developments, including through inter-linkages with their sovereigns, particularly given their large holdings of government securities.