Nigeria: Fitch Ratings upgrades Bank of Industry’s National Rating to ‘AAA’
Fitch Ratings has upgraded Bank of Industry’s National Long-term Rating to ‘AAA(nga)’ from ‘AA+(nga)’ and affirmed the bank’s Long-Term Issuer Default Rating at ‘B’ with a stable outlook.
This is according to a statement released by Fitch, titled “Fitch Affirms Bank of Industry at ‘B’/Stable; Upgrades National Rating to AAA(nga).”
Fitch said, “Fitch Ratings has affirmed Nigeria-based Bank of Industry Limited’s (BOI) Long-Term Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook.
Fitch has also upgraded BOI’s National Long-Term Rating to ‘AAA(nga)’ from ‘AA+(nga)’, reflecting a view of an increased likelihood of support from the Nigerian authorities for the bank’s local currency obligations.
Reason for the upgrade
According to the report, BOI’s Long-Term IDR and SRF are equalized with the sovereign Long-Term IDR because the Nigerian authorities are seen to have a high proclivity to assist BOI.
The report said “Our assessment primarily reflects (i) the bank’s important and clearly defined policy role in funding economic growth in Nigeria; (ii) its 99.9% state ownership, split between the Ministry of Finance (94.8%) and the Central Bank of Nigeria (CBN; 5.1%); and (iii) the entirety of the bank’s wholesale funding being either provided or guaranteed by the Nigerian state.
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“However, Fitch also views the ability of the authorities to support BOI as limited by Nigeria’s ‘B’ Long-Term IDR. BOI is Nigeria’s primary development bank, with the mandate of financing the country’s emerging industrial sector. The bank plays an important role in supporting government policies and in providing counter-cyclical loans since the onset of the economic crisis resulting from the coronavirus pandemic.”
The report added that the bank secured syndicated loans that are fully guaranteed by the CBN, thereby increasing its funding.
“BOI’s funding has increased substantially since March 2020, as the bank secured two large syndicated loan facilities of EUR1 billion and USD1 billion from syndicates of commercial banks and multilateral development banks, which are fully guaranteed by the CBN. The proceeds of the borrowings are swapped with the CBN, boosting its foreign-exchange (FX) reserves and providing BOI with Nigerian naira to support its developmental activities.
BOI’s management has indicated that this fundraising will serve to expand the bank’s lending to priority sectors. It might take BOI substantial time to channel the recently attracted funding to borrowers and as of end-1H21, 48% of BOI’s total assets were kept in liquid government bonds and cash, compared with 20% at end-2019,” the report said.
