Naira Depreciation Raises Credit Risk Concerns

Financial expert Busari Akande has raised concerns that the naira's depreciation could lead to increased loan defaults and hinder business operations in Nigeria. Akande, a Fellow of the Institute of Credit Administration, FICA, highlighted the potential impact of the naira's decline at the Nigerian Autonomous Foreign Exchange Market, NAFEM, at the start of November.

Despite the 0.12 per cent daily depreciation seeming minor, Akande warned that its cumulative effect could exacerbate financial pressures on businesses already dealing with high borrowing costs and rising operational expenses.

Akande's analysis noted that import-dependent companies, especially in manufacturing and consumer goods, may face higher raw material costs and reduced profit margins due to the naira's depreciation. He also warned that currency depreciation could lower household purchasing power and affect individuals' ability to repay personal loans and mortgages.

Furthermore, Akande expressed concern that banks' focus on investing in government securities with attractive returns could limit funds available for private-sector lending, making it harder for businesses to access credit.