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Nigerian banks to remain resilient despite elevated credit risks from deteriorating operating environment 

November 18, 2015

Moody's Investors Service

Moody's Investors Service expects Nigerian banks' nonperforming loans to rise in 2016, driven by the deteriorating repayment capacity of borrowers in the oil and gas sector, although their profitability will remain sufficient to absorb related provisioning needs.

The report, "Banking System Overview: Nigeria", is now available on www.moodys.com. Moody's subscribers can access this report via the link provided at the end of this press release. The report is an update to the markets and does not constitute a rating action.

As a reflection of lower oil prices that will continue to constrain fiscal revenue and public expenditure, Moody's expects Nigeria's real GDP growth to decelerate to 3.5% in 2015 before recovering to 4.9% next year, from over 6% in 2014.

"Over the next two years, we expect Nigerian banking system problem loans to rise above 5%, but remain below 10%, owing to the disproportionate exposure to the oil and gas sector, the high level of unseasoned loan stock as a result of strong loan growth in recent years, and the high level of foreign currency denominated loans," says Akintunde Majekodunmi, a Vice President -- Senior Analyst at Moody's and a co-author of the report. "These loan portfolio characteristics are being pressured by Nigeria's challenging macroeconomic environment." Read more

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