Nigerian Banks in Distress? Not Exactly

Godwin Emefiele, Governor, Central Bank of Nigeria

Nigeria’s economy has spent much of 2016 in recession for the first time in over two decades. Unsurprisingly there has been speculation about the strength of its banking system.

Non-performing loans have already hit 12 percent of Nigerian banking assets. How could these institutions possibly survive?

Better regulation, as it happens.

Abysmally low oil prices and the effects of an artificially propped-up naira have shrunk the economy. Until April, Nigeria was the region’s top oil producer only to be overtaken by Angola.

Manufacturers, a key borrower in the economy, are hurting. Recent indicators point to a prolonged contraction in manufacturing output despite a slight uptick in recent months, and 90 percent of firms are operating below capacity.

Despite these pressures, in an assessment of the five largest banks – which account for nearly 50 percent of banking assets in Nigeria – ratings agency Moody’s found some positives. “The Nigerian banking system is actually very well regulated compared to the past,” says Akin Majekodunmi, a vice president at Moody’s Investor Service.

Read more: Nigerian Banks in Distress? Not Exactly – This is Africa