Problem loans at Nigerian banks are set to rise to 9% of total loans by the end of this year, versus 6% in 2020, Moody’s predicts. That would give Nigerian banks a joint, high level of problem loans alongside Russia among the emerging markets which Moody’s surveyed.
The underlying non-performing loan (NPL) ratio of the sector is much higher than the reported 6%, due to the central bank allowing banks to provide moratoriums to borrowers hurt by Covid-19, says Ronak Gadhia, director for sub-Saharan African banks research at EFG Hermes Frontier in London.
The central bank will allow commercial banks to “continue to ‘extend and pretend’ or provide further moratoriums to distressed borrowers,” he says.