Fitch Ratings forecasts a rise in non-performing loans for Nigerian banks in 2024, attributing this trend to soaring interest rates and persistent inflation. In its latest report on Nigeria’s credit ratings, Fitch affirms the country’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B-’ with a Positive Outlook.
The agency notes that by the end of 2023, the banking sector’s loan books represent only 35% of total assets, a relatively low figure. Fitch predicts that the regulatory non-performing loans will increase from 5.1% at the end of the first quarter of 2024 due to the economic pressures of high inflation and interest rates.
The report also highlights recent decisions by the Central Bank of Nigeria (CBN) to raise capital requirements for banks, set to be fully implemented by the end of the first quarter of 2026. It points out the 70% windfall levy on banks’ foreign exchange gains for 2023 and early 2024, stating that these measures are not expected to compromise capital adequacy ratios.
Fitch anticipates another increase in the Monetary Policy Rate (MPR) in the final quarter of 2024. The ongoing application of monetary tools, including open market operations, aims to enhance the effectiveness of monetary policy following a period of financial repression.
Nigeria’s inflation rate surges to 32.7% in September 2024, reversing a two-month decline influenced by rising petrol prices that elevate transportation costs. Food inflation escalates to 37.77% year-on-year, marking a significant increase from 30.64% in September 2023.
Monthly food inflation reaches 2.64% in September, up from 2.37% in August, reflecting a 0.27% rise. Under the leadership of CBN Governor Yemi Cardoso, the monetary policy rate sees five consecutive hikes to combat inflation and stabilize the economy. The rate climbs from 18.75% to 22.75%, with further adjustments to 24.75%, 26.25%, and 26.75%. Most recently, in September 2024, the Monetary Policy Committee raises the rate by 50 basis points to 27.25%.
These cumulative increases, totaling 850 basis points since Cardoso took office, are part of efforts to tackle Nigeria’s ongoing inflation challenges, particularly in core and food sectors.
