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Fitch Ratings has expressed concerns that new regulations from the Central Bank of Nigeria (CBN) might hinder the banking sector’s ability to support the Nigerian economy.
Fitch revised the Outlook on the Long-Term Issuer Default Ratings (IDRs) of five Nigerian banks and one bank holding company to Positive from Stable while affirming the Long-term IDRs at ‘B-’.
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Fitch highlighted the issue of a $2.2 billion foreign exchange backlog that the CBN governor, Dr. Olayemi Cardoso, stated could not be verified and therefore would not be paid.
It noted the risks of the CBN introducing more regulations detrimental to the banking sector, especially amidst renewed volatility in the forex market.
The rating agency revised the outlook of Access Bank Plc, Zenith Bank Plc, United Bank for Africa Plc (UBA), Guaranty Trust Bank Limited (GTB), Guaranty Trust Holding Company Plc (GTCO), and Bank of Industry Limited (BOI) in its latest report.
The revision of the Outlooks on the Long-Term IDRs of these banks mirrors the recent sovereign Outlook revision, indicating that Nigeria’s Long-Term IDRs may be less of a constraint on the issuers’ creditworthiness in the near term.
Fitch also revised the Outlook on BOI’s Long-Term IDR, indicating an improvement in the government’s ability to support the policy bank. This reflects government reforms aimed at restoring macroeconomic stability and enhancing policy coherence and credibility.
The rating agency noted that while the banking sector faces challenges due to currency devaluation, inflation, and increased capital requirements, the ability of banks to tolerate these risks will be supported by equity issuance over the next two years.
Overall, Fitch’s assessment suggests cautious optimism about the Nigerian banking sector’s prospects amid ongoing economic reforms and challenges.
