Moody’s Upgrades Nine Nigerian Banks From Negative to Stable Outlook

Moody’s Investors Service, a global rating agency upgraded its outlook of 9 Nigerian banks to stable from a negative outlook and affirmed its B2 rating of the banks.

The banks include the five biggest banks in the country; the so-called ‘FUGAZ’, First Bank of Nigeria Limited, United Bank for Africa Plc, Guaranty Trust Bank Limited, Access Bank Plc, and Zenith Bank Plc. Other banks included are Fidelity Bank Plc, Union Bank of Nigeria Plc, FCMB Limited, and Sterling Bank Plc.

It maintains that although the operating environment in Nigeria is tough, the banks’ financial profiles have been generally resilient to the difficult operating environment.

Moody’s explained that the upgrade is based on expectations that the banks’ solvency will remain at adequate levels, supported by resilient profitability over the next 12-18 months before the next upgrade. It also expects that higher oil prices and some measures taken by the government will help stabilize the sovereign’s credit metrics, thus stabilizing the sovereign credit profile and, in turn, those of the banks.

It went on to say that the Banks’ pre-provision profitability is recovering to pre-pandemic levels while their capital and funding positions, particularly in local currency, have remained strong. It believes the change in outlook is linked to that of the Government. It affirmed the Nigerian government’s long-term issuer ratings of B2 and changed the outlook to stable from negative on the 29th of November 2021.

Nonperforming loans have decreased in recent years, the average NPL ratio reported fell from 6% at the end of 2020 to 5.3% in October 2021. The rating agency expects some asset quality deterioration once forbearance lapses but expects the pressures to be mitigated by the high oil prices if the prices are sustained. Moody’s maintains that although the operating environment in Nigeria is tough, the banks’ financial profiles have been resilient to the operating environment in Nigeria.

Moody’s Investors Service is a leading provider of credit ratings, research, and risk analysis that covers 130 countries, 11,000 corporate issuers, 21,000 public finance issuers, and 76,000 structured finance obligations.