Moody’s Investors Service, an international rating agency, has downgraded nine Nigerian banks after its recent downward review of Nigeria’s sovereign rating. The banks affected 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, First City Monument Bank Limited, and Sterling Bank Plc.
In a statement issued on Tuesday, Moody’s said it lowered the long‑term deposit ratings, issuer ratings, and, where applicable, senior unsecured debt ratings of all nine lenders from B3 to Caa1. The agency also changed the outlook on these ratings to stable.
Moody’s explained that today’s actions follow its January 27, 2023 downgrade of the Nigerian government’s long‑term issuer rating to Caa1 from B3, with the outlook also shifted to stable. The downgrade of the banks’ long‑term ratings reflects two main factors: a weakening operating environment, captured by Moody’s lowering Nigeria’s macro‑profile to “Very Weak” from “Very Weak+,” and the link between the sovereign’s deteriorating creditworthiness and the banks’ balance sheets, given their substantial holdings of sovereign debt securities.
The revised macro‑profile reflects Moody’s expectation that depressed and uncertain oil production, capital outflows driven by a flight to quality, and the government’s constrained access to external funding will continue to pressure Nigeria’s external position in 2023. Rated Nigerian banks have significant direct and indirect exposure to the sovereign, with a large portion of their assets located in the country and sovereign debt holdings representing 28 % of their aggregate total assets as of June 2022. Consequently, the banks’ credit profiles are closely tied to the sovereign’s rating, which was downgraded on 27 January 2023 amid expectations of further fiscal and debt deterioration.
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