Analysts believe banks can ‘renew and pretend’ on problem loans

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Problem loans in Nigerian banks are forecast to grow to 9% of total loans by the end of this year, up from 6% in 2020, Moody’s predicts. This will give Nigerian banks a joint high level of problem loans along with Russia among emerging markets, which Moody’s has researched.

The sector’s basic non-performing loans (NPL) ratio is much higher than the stated 6%, due to the central bank allowing banks to impose a moratorium on borrowers affected by Covid-19, says Ronak Gadhia, research director for sub-Saharan African banks at EFG Hermes Frontier in London.

The central bank will allow commercial banks “to continue to ‘renew and pretend’ or introduce additional moratoriums on problem borrowers,” he says.

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