International rating downgrade 9 Nigerian banks

International rating downgrade 9 Nigerian banks

An international rating, Moody’s investors’ service has downgraded nine (9) Nigerian banks following its downward review of Nigeria’s rating last week.

The international rating agency downgraded to Caa1 from B3 the long-term deposit ratings, issuer ratings as well as the senior unsecured debt ratings (where applicable), all the nine lenders, it said in a statement issued on Tuesday

Also, the downgrade rating reflected a combination of two factors – the weakening operating environment, as captured by Moody’s lowering of its Macro Profile for Nigeria to “Very Weak” from “very weak+”.

And the interlinkages between the sovereign’s weakened creditworthiness (as indicated by the downgrade of the sovereign rating to Caa1 from B3) and the banks’ balance sheets, given the banks’ significant holdings of sovereign debt securities.

In addition, It reported that the revised macro Profile for Nigeria reflects Moody’s expectation that depressed and uncertain oil production, capital outflows amid a flight to quality, and the government’s constrained access to external funding will likely continue to weigh on Nigeria’s external position in 2023.

The revised Macro Profile also captures the risks that foreign currency shortages in the country pose to the liquidity, capitalization, and asset quality of Nigerian banks.

As reported by Daily Trust, Moody said the stable outlook on the sovereign rating reflects the fact that “while a new administration could reinvigorate the reform impetus in Nigeria after the general elections planned for 25 February 2023 and thereby support fiscal consolidation, implementation will likely remain lengthy amid marked social and institutional constraints”.

“Indeed, the government has long-held the aim of raising non-oil revenue and phasing out the costly oil subsidy, but these objectives necessitate reforms that are institutionally, socially, and politically challenging to carry through.

Meanwhile, funding conditions are likely to remain tight.

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