By Modupe Gbadeyanka
The stable outlook on the Nigerian banking system by Moody’s Investors Service has been maintained as the Nigerian government continue to find solutions to the Dollar shortages that have affected the economy.
A statement issued by the global rating agency on Wednesday said Nigerian banks should have sufficient capital to absorb expected losses, though it expects system-wide tangible common equity (TCE) to only decline slightly to 14.1 percent of adjusted risk-weighted assets by year-end 2018 from 14.7% at the end of 2016.
The slight shift, Moody’s explained, is primarily due to increased loan-loss provisions and the effect of further expected naira depreciation on the balance of risk-weighted assets denominated in foreign currency.
In a report by Moody’s entitled ‘Banking System Outlook: Nigeria,’ the agency said the maintained stable outlook reflects its view that acute foreign-currency shortages will gradually ease, though loan risks will remain high.
It said the present outlook expresses its expectation of how bank creditworthiness will evolve in Nigeria over the next 12-18 months.
“With oil prices and economic activity gradually recovering in Nigeria, we expect banks’ Dollar liquidity pressures to gradually ease over our outlook period,” the Vice President and Senior Analyst at Moody’s, Mr Akin Majekodunmi, commented.
“However, we expect asset quality to worsen slightly over the outlook period, as historically low oil prices, currency depreciation and economic contraction experienced in 2016 continue to generate new nonperforming loans in 2017,” he added.
Adedapo Adesanya 
Aduragbemi Omiyale