Moody’s Investors Service has downgraded all 9 Nigerian banks it rates, saying the move stems from its downgrade of Nigeria’s rating last week.
The banks involved are Access Bank Plc, Zenith Bank Plc, First Bank of Nigeria Limited, United Bank for Africa Plc, Guaranty Trust Bank Limited, Union Bank of Nigeria plc, Fidelity Bank Plc, FCMB (First City Monument Bank) Limited and Sterling Bank. Anonymous society.
The international ratings agency downgraded the long-term deposit ratings, issuer ratings and senior unsecured debt ratings (where applicable) of the nine lenders to Caa1 from B3, it said in a statement issued on Tuesday.
Moody’s also changed the outlook to stable on the long-term deposit ratings, issuer ratings and senior unsecured debt ratings (where applicable) of the nine rated Nigerian banks, it said.
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“Today’s rating actions follow Moody’s downgrade on January 27, 2023 of the Nigerian Government’s long-term issuer rating to Caa1 from B3, and the change in outlook to stable,” it said in a statement. .
He explained that the downgrade of the long-term ratings of nine Nigerian banks reflects a combination of two factors: the weakening operating environment, reflected by Moody’s downgrading its macro profile for Nigeria to “Very Weak” from “Very Weak+”; and the links between the sovereign’s weakened creditworthiness (as indicated by the downgrade of the sovereign’s rating to Caa1 from B3) and banks’ balance sheets, given the banks’ significant holdings of sovereign debt securities.
He said the revised macro profile for Nigeria reflects Moody’s expectation that depressed and uncertain oil production, capital outflows amid the search for quality and restricted government access to external financing are likely to continue to weigh on the position. outside of Nigeria in 2023.
The revised Macro Profile also captures the risks that the scarcity of foreign currency in the country poses to the liquidity, capitalization and asset quality of Nigerian banks.
“Rated Nigerian banks have significant direct and indirect exposure to the Nigerian sovereign, with a significant portion of their assets located in the country and sovereign debt holdings representing 28% of their aggregate total assets as of June 2022,” it said.
“The government exposure links the banks’ credit profiles to those of the sovereign, whose rating was downgraded on January 27, 2023, to reflect Moody’s expectation that the government’s fiscal and debt position will continue to deteriorate.”
The government faces extensive fiscal pressure, while response capacity remains constrained by Nigeria’s institutional weaknesses and long-standing social challenges,” the ratings agency added.
Moody’s said the stable outlook on Nigerian banks’ long-term deposit, issuer and senior unsecured debt (where applicable) ratings is in line with the stable outlook on the Nigerian government’s rating.
Furthermore, he said the stable outlook on the sovereign rating reflects the fact that, “while a new administration could reinvigorate reform momentum in Nigeria after general elections scheduled for February 25, 2023 and therefore support fiscal consolidation, implementation is likely to take a long time amid marked changes. social and institutional constraints.
“Indeed, the government has long had the goal of increasing non-oil revenue and phasing out the costly oil subsidy, but these goals require reforms that are institutionally, socially, and politically difficult to carry out. In the meantime, financing conditions are likely to remain tight.”