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Moody’s Investors Service said a four percent devaluation of the naira will put further pressure on the quality of banks’ assets.

The service analyst, Peter Mushangwe disclosed this Monday in an emailed response to questions, Bloomberg said.

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Mushangwe said: “A four percent devaluation of the naira versus the dollar will put negative pressure on Nigerian banks’ asset quality and capital metrics as they have a high proportion of foreign-currency denominated loans.

“Foreign-currency borrowers who do not earn foreign currency will require higher naira cash flows to meet their obligations, diminishing their repayment capacity.

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READ ALSO: Breaking: CBN Devalues Naira, Sells Dollar At N380/USD

“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,”

Recently, the naira experienced the biggest daily depreciation of N15 in the parallel market since 2017. According to naijabdcs.com, the exchange rate platform of the Association of Bureaux De Change (ABCON), the parallel market exchange rate rose to N382 per dollar on 12th of March, 2020 from N367 per dollar on 11th of March 2020.

This trend also persisted in the Investors and Exporters (I&E) window during the period as the indicative exchange rate jumped to N374 per dollar at the close of business from N368.33 per dollar on 11th of March 2020, translating to N5.67 depreciation for the naira, and the biggest daily depreciation since 2017.

Last week, as a result of  the adverse effect of Corona Virus  Disease (COVID’19), the Central Bank of Nigeria (CBN) weakened the parallel market rate for the currency to N380 per dollar from N365 while the official exchange rate was allowed to depreciate by 15 percent to N360 per dollar from N307 per dollar.

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