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Nigeria, Almost Immune to Global Banking Crisis

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CEM REPORT, FINANCE | Nigeria is very likely to be unscathed by the recent banking crisis in the United States of America and Europe experts have opined.

Experts say there might be indirect effects but notes that it will take several months to materialize in the Nigeria economy.

This is according to a recent report published by Coronation Securities Limited, titled “Does this affect Nigeria?

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The report which is coming on the back of Silicon Valley Bank (SVB) crisis that is spreading to multiple banks globally.

The report which notes that the US and European banking crises are unlikely to have direct effects on the Nigerian banking system adds that the Federal Government of Nigeria’s bonds will be barely affected as well.

The report warned that Nigerian banks could only be exposed if their US dollar borrowings, or the US dollar bonds issued and held by international banks cannot be renewed

It added that Nigeria as an emerging market has performed better than its counterparts however foreign lenders could become overly-sensitive to emerging market risk as a result of the crisis.

“This issue that is non-renewal of loans and bonds could materialize 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.”

Also, the report notes that the banking crisis could have an indirect effect especially on oil prices and affect the country budget expenditure.

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“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 materialize.”

It added that “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 specialized and understand the risks of Nigeria as distinct from those of risky assets generally.”

Meanwhile, Governor of the Central Bank of Nigeria (CBN) has 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.

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