By Ade Jacobs
Global ratings agency, Fitch, has forecasted that banking business in Nigeria will pick up in the first quarter of 2021 after headwinds caused by the coronavirus pandemic slowed activities in the sector in the outgoing year.
The agency, in its December report titled “Fitch Ratings Sees Gradual Recovery for African Banks in 2021,” said deposit money banks, DMBs, in the country have been very careful in granting loans to customers, which has helped to avert risky give-outs.
Fitch stated that “Funding and liquidity will remain broadly stable. Banks are generally more liquid due to slower loan growth and risk aversion. Deposit growth will remain strong. Foreign-currency liquidity risks have not materialised, particularly in Nigeria but present a significant risk to banks’ ratings.”
It, however, warned that “we do not expect a return to pre-pandemic performance levels for at least another two years.
“Asset quality will deteriorate faster in 2021 and beyond due to the lag effect of the pandemic on households and businesses, combined with the expiry of temporary debt-relief measures.”
The renowned credit agency further stated that commercial banks must be ready to restructure their large corporate loans to forestall loans default, adding that DMBs will prefer to press for loan recovery from small customers and SMEs as impaired loans could rise as much as two digits.