Fitch affirms BoI’s sovereign rating, stable outlook

Fitch Ratings has re-affirmed the national ratings of the Bank of Industry (BoI) describing its outlook as stable, even as it downgraded the support ratings of other banks.

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.

The rating agency, which downgraded other banks due to doubt in government’s ability to support them in foreign currency as a result of weakening and eroding foreign currency reserves/ revenues, as well as limited confidence that any available foreign currency will not be used to execute other policy objectives, noted that BoI’s ratings were retained because its operations are solely in local currency.

According to Fitch, the IDRs of BoI, a state-owned policy bank, are driven by its SRF of ‘B+’ and reflect a limited probability of sovereign support.

“The IDRs of BOI, a state-owned policy bank, are driven by its SRF of ‘B+’ and reflect a limited probability of sovereign support. They consider its 99.9% state ownership, policy role and strategic
importance to Nigeria’s economic and industrial development. They also consider the authorities’ stronger ability to support BOI than commercial banks, as BOI’s operations are solely in local currency. BOI’s Long-Term IDR has a stable outlook, reflecting the stable outlook on the sovereign rating.

“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”, a statement from Fitch added.

BoI however maintained that it remains very virile and better repositioned to push the frontier of the nation’s industrial sector through aggressive business financing.On the rating of other banks, Fitch noted that it is monitoring the banks’ ability to meet maturing foreign-currency obligations.

“In the current difficult market conditions, Fitch believes the banks are face challenges to refinance existing obligations and/or obtain foreign exchange from the Central Bank of Nigeria to meet maturing 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”, it added.