Less than a week after Moody’s global rating agency changed the outlook on Nigeria from stable to negative, the agency has downgraded the 2020 outlook for Nigerian and other African banks from stable to negative.
The New York-based agency said on Monday that the weakening operating conditions and rising asset quality pressures were the basis for the negative outlook.
“The 2020 outlook for African banks has changed to negative from stable, reflecting their weakening environment,” Moody’s Investors Service said in a report published today.
Banks in the continent will maintain high exposures to their respective sovereigns, linking their credit profiles to those of their government, the global rating agency said.
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Moody’s last week changed the outlook on Nigeria from stable to negative, citing the increasing fragility of the country’s public finances and sluggish growth prospects.
“Weakening operating conditions are pressuring governments’ credit quality leading to a knock-on effect on banks through reduced business generation, slower credit growth, and rising asset risk,” said Constantinos Kypreos, Senior Vice President at Moody’s.
While the negative outlook is for all banks in Africa, the projection by Moody’s stated that lenders in countries like Nigeria, South Africa, Tunisia, and Angola “will face the greatest challenges; Egyptian, Moroccan, Mauritian and Kenyan banks will be more resilient”.
