Moody's affirms stable outlook for WAEMU's banking sector

Moody's Ratings has shifted the outlook for the banking sector of the West African Economic and Monetary Union (WAEMU) from negative to stable. The ratings agency anticipates robust economic growth across the region in 2025, driven by various factors such as stable global growth, increased investments in energy and infrastructure, and the expansion of the service sector. Mik Kabeya, VP-Senior Analyst at Moody's Ratings, emphasized that this positive economic environment will create business opportunities for banks in the region, allowing them to lend more and generate higher fees. The report highlights stable outlooks for two banking systems in Africa, with six rated as stable. Despite the exit of Burkina Faso, Mali, and Niger from ECOWAS, Moody's remains optimistic about the region's economic prospects, citing increased private sector investments and macroeconomic stability as key drivers of growth. While there are risks associated with the departure of these countries, including regional tensions and disruptions to economic integration, Moody's believes that the overall positive economic outlook will offset these challenges. In Nigeria, structural reforms, particularly in the foreign exchange market, have led to improving macroeconomic conditions. Although there are concerns about sovereign debt distress in the region, Moody's expects the stable outlook for African sovereigns to help mitigate risks for the banking sector. Loan growth in the WAEMU region is expected to remain strong, fueled by economic expansion and limited banking sector penetration. Overall, Moody's forecasts a stable and favorable environment for lenders in the WAEMU region, with tailwinds expected to support continued growth in the sector.