(The following statement was released by the rating agency)
Fitch Ratings-London-July 24: The Nigerian banking sector's high stock of bad
loans continues to weigh on banks' credit profiles, and asset quality remains a
key sensitivity for all Nigerian banks, Fitch Ratings says in a new report.
Operating conditions have eased but we do not expect asset quality to improve
significantly this year as banks continue to deal with impaired and other
problem loans. We believe new regulation to encourage lending could lead to
weaker asset quality and erode capital.
Nigerian banks have suffered from high credit losses in recent years,
particularly from their exposure to the oil and gas sector. Stage 3 (impaired)
loans under IFRS 9 were high at 9.4% of gross loans at end-2018, and banks also
have large stocks of other potentially problematic Stage 2 loans. These mostly
comprise restructured loans, and accounted for an additional 16% of gross loans
at end-2018.