Fitch: Nigerian banks to see smaller FX revaluation gains in 2024

Fitch Ratings has projected that Nigerian banks will continue to face domestic and global operating environment risks in 2024. The firm recognizes the resilience of the banking sector, attributing it to strong business profiles that enable banks to generate significant revenues and absorb credit losses. The Senior Director and Head of Bank Ratings for the Middle East and Africa at Fitch Ratings, Eric DuPont, recently discussed the firm's 2024 African Banks Outlook report during an interview with CNBC Africa. DuPont highlighted key factors impacting African banks, including the effects of inflation, interest rates, and currency devaluations. In the report, Fitch emphasized that most African countries are displaying resilience supported by higher oil prices. The positive outlook is expected to benefit Nigerian banks as well. In 2023, African banks reported strong net profits driven by increasing interest margins, loan growth, and revaluation gains on net long open currency positions. Despite a rise in impairment charges due to higher interest rates and inflation, the overall profitability of African banks was maintained. Looking ahead to 2024, Fitch anticipates continued high business volumes supported by elevated commodity prices and interest rates. The firm projects limited impacts of currency devaluations on bank profits and expects impaired loans to rise initially but benefit from lower interest rates in the second half of the year.