A four per cent devaluation of the naira versus dollar “will put negative pressure on Nigerian banks’ asset quality and capital metrics as they have a high proportion of foreign-currency denominated loans,” Peter Mushangwe, Moody’s Investors Service analyst says in emailed response to questions on Monday.
Nigeria’s central bank weakened the market rate for the currency to 380 naira per dollar from 365 naira while the official exchange rate was allowed to depreciate by 15% to 360 naira per dollar from 307 naira.
“Foreign-currency borrowers who do not earn foreign currency will require higher naira cashflows to meet their obligations, diminishing their repayment capacity.”
“A weaker naira also increases Nigerian banks’ risk weighted assets related to their foreign currency loans, putting negative pressure on their capital metrics. However, the banks hold good capital buffers” Moody’s said.