Financial expert Busari Akande has warned that the continued depreciation of the Nigerian naira could trigger higher loan defaults, strain business operations and tighten access to credit across the country.
Akande, a Fellow of the Institute of Credit Administration (FICA), said the naira’s 0.12 per cent daily fall at the Nigerian Autonomous Foreign Exchange Market (NAFEM) in early November may seem modest, but its cumulative effect could exacerbate the financial pressures already faced by companies dealing with high borrowing costs and rising operating expenses.
In his analysis, “Unmasking the Naira’s November Shuffle: A Dual Lens on Credit Risk and Financial Resilience,” Akande highlighted that import‑dependent firms—especially in manufacturing and consumer goods—are likely to see raw material costs climb and profit margins shrink. This could erode their ability to service existing loans, forcing some to seek short‑term financing rather than invest in growth.
He also cautioned that the currency slide would weaken household purchasing power, reducing individuals’ capacity to repay personal loans, mortgages and other credit facilities. Small and medium‑scale enterprises (SMEs), which rarely have access to hedging instruments, are particularly vulnerable to such exchange‑rate swings.
Akande noted that banks’ preference for investing in government securities with attractive returns could further curtail the funds available for private‑sector lending, making it harder for businesses to secure financing.
Despite these risks, he pointed to Nigeria’s foreign‑exchange reserves of $55.22 billion and the narrow gap between official and parallel market rates as buffers against a major crisis.
He urged banks and credit administrators to strengthen loan monitoring, conduct regular stress tests against potential rates of N1,450 to the dollar, and identify vulnerable borrowers before defaults occur. Akande also advocated restructuring loans for viable businesses facing temporary cash‑flow difficulties through extended repayment periods and principal moratoriums, urging institutions to adopt proactive risk‑management measures rather than panic.
<small>Source: Daily Post Nigeria — read the original story there.</small>
