Report: US, European Banking Crises Unlikely to Affect Nigerian Banks

Nume Ekeghe

A recent report by Coronation Securities Limited has stated that the recent banking crisis in the United States of America and in Europe, which is spreading to multiple banks, is unlikely to have any effect on Nigerian banks.

This is coming as the Governor of the Central Bank of Nigeria (CBN) affirmed that there is zero exposure of Nigerian banks of the Silicon Valley Bank (SVB) which has birthed the rippling banking crisis with more banks failing in the US and Europe.

According to the report, “Does this affect Nigeria? Our answer is that the US and European banking crises are unlikely to have direct effects on the Nigerian banking system. We also think that the Federal Government of Nigeria’s bonds will be barely affected by this.

“There may be some indirect effects, however, if the US and European banking crises negatively affect global growth and, in turn, cause oil prices to settle below the $75.0/pbl level which is assumed in Nigeria’s 2023 budget; such an indirect effect would take time, several months, to materialise.”

The report further stated that Nigerian banks could be exposed if their US dollar borrowings, or the US dollar bonds they issue, held by international banks cannot be renewed

It added: “This issue that is non-renewal of loans and bonds could materialise if foreign lenders become overly-sensitive to emerging market risk as a result of the crisis. On this point it is important to understand that Nigeria, as an emerging market, has fared much better than the likes of Ghana, Pakistan, Turkey and Sri Lanka recently. It is considered one of the better credits among its peers so we do not put very much weight on this risk.

“This being the case, we would not expect a negative impact on the borrowing costs of the government of Nigeria itself, or at least not much. It is true that global markets are less keen on risk than they were a month ago, but we believe that investors in Federal Government of Nigeria (FGN) Eurobonds are quite specialised and understand the risks of Nigeria as distinct from those of risky assets generally.”