Nigerian Banks Ready to Exit Longstanding Forbearance
The vast majority of Nigerian banks are expected to exit longstanding forbearance by the end of 2025, even though the expiry of forbearance will lead to some large Stage 2 loans being reclassified as impaired, Fitch Ratings says in a new peer credit analysis on the country’s major banks.
The Nigerian banking sector remains subject to highly burdensome regulations, inflation and interest rates are forecast to remain high in the near term, and the expiry of longstanding system wide forbearance at end-1H25 will lead to notably higher impaired loans ratios and pressure on total capital adequacy ratios.
The banks’ preparedness is supported by the restructuring of many Stage 2 loans, capital raisings across the banking sector spurred by a large increase in paid-in capital requirements, and increased loss-absorption capacity resulting from improved net interest margins.
According to Fitch, this will help counteract increased loan impairment charges and prudential provisions resulting from the expiry of forbearance and the associated pressure on total capital adequacy ratios across the banking sector.
Fitch said certain banks will be allowed to continue operating under forbearance, subject to certain penalties, including the inability to pay dividends.
Analysts noted that the naira devaluation has been positive for the banking sector’s foreign-currency liquidity, as it has led to higher FX market turnover.
Eurobonds totalling USD2.2 billion mature or are callable by end-2026. The banks generally have sufficient liquidity to meet their Eurobond obligations without needing to refinance. #Nigerian Banks Ready to Exit Longstanding Forbearance CBN Sells $166m to Banks, FX Forward Contracts Depreciate
