Moody's Downgrade Nine Major Nigerian Banks

Moody's Investors Service, a global rating agency, has granted lower ratings to nine Nigerian banks. This development follows a recent downgrade of Nigeria's rating.

In a statement published on the company's website, Guaranty Trust Bank Limited, Fidelity Bank Plc, Union Bank of Nigeria Plc, Zenith Bank Plc, Access Bank Plc, First Bank of Nigeria Limited, Sterling Bank Plc, First City Monument Bank Limited were named as some of the affected financial institutions.

The rating agency downgraded the long-term, issuer, deposit, and senior unsecured debt ratings (where applicable) of all nine lenders to Caa1 from B3.

All nine Nigerian banks that Moody's has evaluated have had their long-term deposit ratings, issuer ratings, and senior unsecured debt ratings (where applicable) changed to stable from negative.

The following explains what happened: "Today's rating actions follow Moody's downgrading of the Government of Nigeria's long-term issuer rating to Caa1 from B3 on January 27, 2023, and change in the outlook to stable."

Moody's also stated that the downgrade of the affected banks' long-term ratings reflected a combination of two factors, including a weakening operating environment "as reflected in Moody's downgrading of Nigeria's Macro Profile to "Very Weak" from "Very Weak+"; and the interconnections between the sovereign's weakened creditworthiness (as indicated by the downgrade of the sovereign rating to Caa1 from B3) and the banks' balance sheets."

According to the rating agency, the revised macro profile for Nigeria reflects the rating agency's expectation that depressed and uncertain oil production, capital outflows due to flight to quality, and the government's limited access to external funding will continue to weigh on Nigeria's external position in 2023. Therefore, according to the rating agency, this outlook is reflected in Nigeria's revised macro profile.

"Rated Nigerian banks have significant direct and indirect exposure to the Nigerian sovereign, with a major portion of their assets located in the country and sovereign debt holdings accounting for 28 percent of their aggregate total assets as of June 2022," according to the report.

"Government exposure links to bank's credit profiles to the sovereign, whose rating was downgraded on January 27, 2023, to reflect Moody's judgment that the government's fiscal and debt condition will worsen.

According to the research, "the government is under severe fiscal strain, while its ability to respond is limited by Nigeria's long-standing institutional flaws and societal challenges." Another point raised in the study was this.

The rating agency added that the stable outlooks on Nigeria's banks' long-term deposit, issuer, and senior unsecured debt ratings (where applicable) were consistent with the stable outlook on the country's government rating.

What Is the Finance Minister About the Downgrading of Nine Major Nigerian Banks?

Zainab Ahmed, the Minister of Finance, Budget, and National Planning in Nigeria, has expressed shock over the negative rating imposed on nine banks in the country. 

She said, “Let me say that Moody’s report or downgrade came as a surprise to us. But it is an external rating agency that doesn’t understand what has happened in the domestic environment.”

She urged the people of Nigeria to keep their eyes peeled for the S&P rating, which is scheduled to be published in the next few days. She emphasized that " it is expected to present a better outlook for Nigeria."

What Is the Stock Price of the Nine Downgraded Nigerian Banks?

According to Moody’s report, I’ll provide the stock price of the nine affected banks. However, the stock market fluctuates often, so it’ll be best if you check the current stock prices to be updated with the stock price and the performance of banks over the past years.