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Moody’s downgrades Nigerian banks’ rating



The United States-based rating firm, Moody’s Investors Service, has downgraded the long-term deposit ratings, issuer ratings, and senior unsecured debt ratings for banks in the country.

The agency said in a statement on Tuesday that it lowered the banks’ ratings from B3 to Caa1.

The affected lenders 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, FCMB (First City Monument Bank) Limited and Sterling Bank Plc.

Moody’s said it changed the banks’ outlook to stable on the long-term deposit ratings, issuer ratings, and senior unsecured debt ratings.

The agency had on Friday cut Nigeria’s credit ratings from B3 to Caa1, seven levels below investment grade.

According to Moody, obligations rated Caa1 are judged to be of poor standing and are subject to very high credit risk.

READ ALSO: Moody to cuts ratings of nine Nigerian banks over forex crises

It said: “Moody’s downgrade of the long-term ratings of nine Nigerian banks reflects a combination of (a) the weakening operating environment, as captured by Moody’s lowering of its macro profile for Nigeria to ‘very weak’ from ‘very weak+’; and (b) the interlinkages between the sovereign’s weakened creditworthiness (as indicated by the downgrade of the sovereign rating to Caa1 from B3) and the banks’ balance sheets, given the banks’ significant holdings of sovereign debt securities.”

Moody’s stressed that the revised macro profile for Nigeria reflected its expectation that depressed and uncertain oil production, capital outflows amid a flight to quality, and constrained access to external funding would likely continue to weigh on Nigeria’s external position in 2023.

“The revised macro profile also captures the risks that foreign currency shortages in the country pose to the liquidity, capitalisation, and asset quality of Nigerian banks,” the organization added.

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