Following the recent upward review of interest rate by the Central Bank Of Nigeria, the country has been speculated and predicted to plunge into a deeper level of recession with higher inflation rate looming.
FitchRatings has however predicted that the upward review will serve to worsen the woes of Nigerian banks.
FitchRatings in its analysis of the recent review said: “Rising rates are likely to put additional pressure on banks’ asset quality. Almost all lending is extended at floating rates and banks should be able to reprice their loans quite quickly but borrowers will face more difficulties in servicing their debts.
“Impaired loans are already high in the Nigerian banking sector, where average non-performing loan ratios reached 6.2 per cent at end-March 2016, partly reflecting the impact of currency depreciation on businesses as well as higher oil-related problem loans at some banks.”
Recall that the Central bank of Nigeria’s Monetary Policy Committee had on Tuesday increased the interest rate from 12 per cent to 14 per cent, a move aimed at curbing inflation and to strengthen the naira.