BoI retains Fitch’s sovereign rating

Few weeks after Moody’s Investors Service assigned Aa1.ng/NG-1 to the Bank of Industry (BoI), Fitch Ratings has re-affirmed the national ratings of Nigeria’s development bank, describing its outlook as stable.

Fitch said BoI’s ratings were retained because its operations were solely in the local currency, the naira. The ratings agency, however, downgraded other banks owing to uncertainty in government’s ability to support their foreign currency quest as a result of weakening and eroding foreign reserves and revenues.

Fitch had last year downgraded Nigeria’s Long-Term Local Currency Issuer Default Rating (IDR) to ‘B+’ from ‘BB-‘, as a result of which it is now equalised with the Long-Term Foreign Currency IDR.

According to Fitch, the Issuer Default Ratings (IDRs) of BoI, a state-owned policy bank, were driven by its Sovereign Support Floor (SRF) of ‘B+’ and reflect a limited probability of sovereign support.

Fitch considered the BoI’s 99.9 percent state ownership, policy role and strategic importance to Nigeria’s economic and industrial development. It also considered the authorities’ stronger ability to support the development bank than commercial banks.

“BoI’s IDRs, SR and SRF are sensitive to a weakening in Nigeria’s ability to support the bank, which would be indicated by a downgrade of Nigeria’s sovereign rating. The ratings could also be downgraded if Fitch’s view of the state’s willingness to support the bank changes adversely, for example if there is a material change in the government ownership or a change in the bank’s policy role. This is not Fitch’s base case,” Fitch noted.

On the rating of other banks, Fitch noted that it was monitoring their ability to meet maturing foreign-currency obligations.

“The new foreign-exchange regime has provided limited respite in accessing foreign currency in the interbank market. FX forward contracts provided by the central bank since June 2016 have helped reduce large overdue trade finance obligations, which were either extended or refinanced with international correspondent banks,” Fitch added.

In a statement, the BoI said it remained very virile and better repositioned to push the frontier of the nation’s industrial sector through aggressive business financing.

 

ODINAKA ANUDU