Ecobank Nigeria’s Creditworthiness Boosts Ratings Projection by Fitch

Fitch Ratings, a prominent international rating agency, has foreseen a potential upgrade for Ecobank Nigeria (ENG) in its national ratings.

The projection stems from ENG’s notable improvement in creditworthiness compared to other Nigerian issuers.

Fitch expects to resolve the Rating Watch Negative (RWN) within the next six months, as the impact of exchange-rate volatility, regulatory capital ratios, and loan quality following the devaluation becomes clearer.

According to Fitch’s recent report, several factors could potentially trigger positive rating actions and an upgrade for ENG. The first factor is ENG’s ability to maintain compliance with its minimum Capital Adequacy Ratio (CAR) requirements after the devaluation.

Also, ENG should have sufficient buffers to accommodate potential increases in credit concentration and loan-quality risks.

Fitch also noted that an upgrade in ENG’s Viability Rating (VR) and Long-Term Issuer Default Rating (IDR) would necessitate a sovereign upgrade and an overall improvement in operating conditions, coupled with a strengthened financial profile.

Previously, Fitch Ratings had placed Viability Ratings (VRs) of ‘b-‘ and Long-Term Issuer Default Ratings (IDRs) of ‘B-‘ on Rating Watch Negative (RWN) for Ecobank Transnational Incorporated (ETI) and Ecobank Nigeria Limited (ENG). This decision was a direct consequence of the sharp devaluation of the Nigerian naira.

The RWN reflected the risk of ENG potentially breaching its minimum capital requirements due to the direct effect of the devaluation. However, the recent projection by Fitch indicates a positive outlook for ENG’s creditworthiness and suggests a potential resolution of the RWN in the coming months.

Fitch Ratings’ positive projection and potential upgrade for Ecobank Nigeria signify the strengthening of ENG’s creditworthiness relative to other Nigerian issuers. The resolution of the Rating Watch Negative (RWN) within the next six months is anticipated, as factors such as exchange-rate volatility, regulatory capital ratios, and loan quality implications become clearer.

To achieve a full upgrade in ratings, ENG would require a sovereign upgrade and improved operating conditions, alongside a fortified financial profile. These criteria reflect Fitch’s emphasis on the stability and resilience of ENG in the face of economic challenges.

Overall, Fitch Ratings’ assessment demonstrates the positive trajectory of Ecobank Nigeria’s creditworthiness and highlights the potential for enhanced financial performance in the future.