By Sola Alabadan – Lagos
In consideration of the buoyant non-oil and services sectors, as well as private consumption, that are holding up credit demand in Nigeria, Fitch Ratings Limited says banks in the country should witness growth in 2015.
According to statement issued by the rating agency in London on Thursday, growth in sub-Saharan Africa should provide favourable conditions for the region’s banks in 2015, despite the decline in commodity prices.
Credit growth is set to expand because there is strong demand for infrastructure financing and the private sector is buoyant. These are likely to offset the threats from weaker commodity prices and heightened political risk and uncertainty, Fitch Ratings noted.
The agency stated that “Even banks in oil exporting countries, where low oil prices might be expected to trigger loan contraction, are experiencing continued credit demand.
“In Nigeria, buoyant non-oil and services sectors, plus private consumption, are holding up credit demand. Loan growth reached 25% in 2014.”
Fitch Ratings also assigned MPI ‘1’ scores to both “Nigeria, where demand for new lending is strong” and “South Africa, where loan growth expectations are low”. This indicates low systemic risk potential.
Credit expansion is one measure included in Fitch’s macro-prudential indicators (MPI), specifically designed to highlight heightened potential banking sector risks.
MPI scores of ‘3’, which highlight the greatest systemic risk potential, were assigned to relatively few sub-Saharan countries, namely Angola, Ethiopia and Ghana. MPI ‘2’ scores were assigned to Cote d’Ivoire, Congo, Kenya, Lesotho and Mozambique.
Fitch’s Director, Middle East and Africa Financial Institutions, Mahin Dissanayake, stated that “In Angola, public sector investment remains a priority and banks are finding new takers for loans in government entities and ministries. Sub-Saharan banks tend to be awash with deposits; loan/deposit ratios for banking sectors in Fitch-rated countries average 78 percent, which is low by international standards.
“This reflects both limited opportunities for profitable lending and asset structures that tend to be heavily invested in high yielding government securities, rather than loans. Despite plentiful deposits, credit growth can still be constrained because short-term deposits are not well suited to funding longer-term loans.
Source : Independent
