"Nigerian banks face risks despite oil boost \u2013 Fitch"

" \n Nigerian banks face risks despite oil boost \u2013 Fitch \n \n\n \n Nigerian banks\u2019 operating environments could deteriorate in 2022\u20132023 as adverse global economic conditions feed through to the local economy, Fitch Ratings said in a report Thursday. \n \n\n \n Fitch also said the pressures on banks\u2019 profitability and asset quality will be higher than initially expected due to high inflation and a potential economic slowdown. The banks are expected to face these headwinds despite higher oil prices. \n \n\n \n The ratings agency however does not expect the banking sector to experience a material shock. \n \n\n \n Soaring inflation led the Central Bank of Nigeria (CBN) to raise its benchmark rate by 150bp to 13 percent on 24 May, the first increase since 2016. Analysts say the rate hike may be the first of more to come before the end of the year. \n \n\n \n \u201cWe expect interest rates to increase further given accelerating inflation and tighter global financial conditions,\u201d Fitch said. \u201cThis should support the banks\u2019 net interest margins, which have been dented by low rates in recent years.\u201d \n \n\n \n As a major oil exporter, Nigeria should see a boost to its economy and FX reserves from the current very high oil prices. \n \n\n \n However, low production and high import costs for refined products, and the need to subsidise households and businesses, will limit the benefits. \n \n\n \n For banks, the most pronounced benefit of higher oil prices is decreased pressure on asset quality. \n \n\n \n Oil prices and Nigerian banks\u2019 non-performing loan ratios have been closely inversely correlated in the past, reflecting the outsized exposure to the oil and gas sector in loan books, the Nigerian economy\u2019s high dependence on oil revenues, and the spill-over effects from oil to non-oil sectors. \n "

"Nigerian banks face risks despite oil boost \u2013 Fitch"

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