Banking
Fitch Downgrades Union Bank’s National Rating to ‘BBB-(nga)’
By Dipo Olowookere
The National Long-Term Rating of Union Bank of Nigeria Plc’s BBB(nga) has been downgraded to BBB-(nga) by Fitch Ratings.
In a statement issued by the rating agency, it however, said the lender’s Long-Term Issuer Default Rating (IDR) has been affirmed at ‘B-‘ with stable outlook.
Fitch said the downgrade of Union Bank’s National Long-Term Rating mainly reflects its view of weaker asset quality relative to Nigerian peers’, as highlighted by the bank’s disclosure under IFRS 9.
According to the statement released on Tuesday, the rating company said the IDRs of Union Bank are driven by its standalone creditworthiness, as defined by its Viability Rating (VR).
Union Bank’s VR, as with that of other Nigerian banks, is highly conditioned by Nigeria’s operating environment, with the fragile economic recovery restraining banks’ growth prospects and asset quality, Fitch said.
It added that the financial institution’s VR further reflects a moderate franchise, weak profitability, severe loan-quality problems and adequate capitalisation, funding and liquidity.
However, it noted that the stable outlook reflects Fitch’s base case expectation that Union Bank’s credit profile is unlikely to change significantly over the next one-to-two years.
Union Bank’s operations are concentrated in Nigeria and the lender accounted for 4 percent of banking system assets at end-2017.
Union Bank’s stock of impaired loans is declining, the statement noted, as is its exposure to the troubled oil sector. However, the bank’s impaired loans (stage 3 loans under IFRS 9) ratio (24% at end-1H18) is very high compared with the 9.4% average for rated Nigerian banks, driven primarily by its oil sector exposure, it added. Stage 2 loans measured at a further 30 percent of gross loans at end-1H18. Reserve coverage of impaired loans (32% at end-1H18) is low, reflecting management’s view of collateral on impaired loans, Fitch said.
Furthermore, the rating firm said Union Bank is exposed to large credit concentrations. The 20-largest loans measured at 71 percent of gross loans and 128 percent of Fitch Core Capital (FCC) at end-1H18. The volatile oil sector represented 45 percent of Union Bank’s gross loans at end-1H18.
Union Bank’s operating profit/risk-weighted assets ratio was 1.8 percent in 2017 (compared with rated-banks average of 4 percent), which is weak by emerging market standards.
The bank has a high net interest margin, but this is offset by a high cost-income ratio and large loan impairment charges that have eroded around 55 percent to 65 percent of pre-impairment operating profit in recent years.
Capital metrics are somewhat better than similarly-sized peers’, having improved following a rights issue in 2017, Fitch said. However, as a result of IFRS 9 implementation from this year, Union Bank’s FCC ratio declined to 24 percent at end-1H18 (end-2017: 31 percent), the company added.
Union Bank’s high FCC ratio must be considered in the context of the bank’s large unreserved impaired loans, which measured at 45 percent of FCC at end-1H18.
Union Bank benefits from a strong retail deposit base, which accounted for 52 percent of customer deposits at end-1H18, providing an inexpensive source of stable funding. Single-depositor concentration is in line with peers’, with Union’s 20-largest deposits accounting for 21% of the total at end-1H18. Union Bank’s loans/customer deposits ratio (62 percent at end-1H18) sits at the lower end of the peer group.
Foreign-currency liquidity has been tight in recent years, with Union Bank restructuring some trade finance obligations with international correspondent banks in 2015 and 2016. Foreign-currency liquidity pressures have eased and are no longer a significant rating weakness.
Fitch said it believes that sovereign support to Nigerian banks cannot be relied upon given Nigeria’s weak ability to provide support, particularly in foreign currency. In addition, it said there are no clear messages of support from the authorities regarding their willingness to support the banking system.
“Therefore, the Support Rating (SR) and Support Rating Floor (SRF) are ‘5’ and ‘No Floor’, respectively. This reflects our view that senior creditors cannot rely on receiving full and timely extraordinary support from the Nigerian sovereign if any of the banks become non-viable,” the statement said.
It further noted that Union Bank’s Long-Term IDR is sensitive to a change in the bank’s VR. Downside pressure is most likely to result from a material worsening of impaired loans, including the migration of stage 2 loans into the stage 3 category, putting pressure on capital adequacy. A positive rating action is unlikely in the foreseeable future.
“Union’s National Ratings are sensitive to a change in the bank’s creditworthiness relative to Nigerian peers,” the statement said.
By Adedapo Adesanya
The Central Bank of Nigeria (CBN) is considering the recapitalisation and restructuring of Development Finance Institutions (DFIs) to address the significant financing gap facing micro, small, and medium-sized enterprises (MSMEs).
The Deputy Governor of the apex bank in charge of Economic Policy, Mr Muhammad Abdullahi, disclosed this during a panel session at the launch of the Nigeria Development Update by the World Bank in Abuja on Tuesday.
He explained that a recent review by the apex bank found that existing DFIs were too small to meet the credit needs of businesses.
DFIs are specialised, government-backed financial entities designed to promote economic growth by funding critical sectors like agriculture, infrastructure, and SMEs. Key institutions include the Bank of Industry (BOI), Development Bank of Nigeria (DBN), Nigeria Export Import Bank (NEXIM Bank), Bank of Agriculture (BOA), National Credit Guarantee Company Limited, and Nigerian Consumer Credit Corporation, among others.
“We conducted a review last year of the development finance space. Across all the DFIs in Nigeria, the total asset base is slightly above N8 trillion, whereas what is required in development finance for MSMEs is over N130 trillion,” he said.
He said that simply injecting capital would not solve the problem.
“The only way to address this is not only through public sector capital injections into these institutions, but also by making them bankable and investable,” he said.
Abdullahi said the CBN and the Ministry of Finance are reviewing DFI structures to improve their efficiency and risk appetite.
“We are reviewing the entire sector to ensure that we can correct the incentives, improve risk appetite, and also strengthen capital levels,” the deputy governor added.
He also said the reforms aim to introduce stronger market-based principles.
“We are looking at the structure to see how more market fundamentals can be incorporated, because the way it has been done in the past has not delivered the desired results,” Mr Abdullahi said.
On the persistent financing challenge for MSMEs, he said lending to the real sector has always been one of the structural challenges “Nigeria’s economy faces in terms of ensuring that credit reaches businesses that require it”.
Business Post reports that the CBN recently concluded the recapitalisation of the Nigerian banking sector, while the insurance sector is ongoing.
By Modupe Gbadeyanka
The women-focused initiative by Sterling Bank, OneWoman, is already yielding positive results, especially in promoting financial inclusion and empowering female-led enterprises in Nigeria.
Business Post reports that the programme was created to support women through three key pillars of capital, capacity, and community.
In 2025, according to the Head of the OneWoman Initiative, Ms Ezinne Nwokafor, the initiative gave out N43.9 billion loans to 2,450 female entrepreneurs, trained 6,000 of them, served about 380,000 women across three sectors of career women, women in business and freshers, and their vision 2030 is to give out N500 billion loans to one million women across their three sectors.
She noted that a significant majority of Nigerian women remain excluded from formal credit, with only a small percentage able to access structured financing. Despite improvements in financial inclusion, women continue to face systemic barriers that limit their ability to secure funding.
Ms Nwokafor pointed out that women account for a substantial share of micro, small, and medium enterprises and contribute meaningfully to the economy, yet face a financing gap estimated at $42 billion annually, according to the International Finance Corporation.
She also referenced data showing that more than half of women-led businesses identify access to finance as a major constraint, while rejection rates for loan applications remain significantly higher for women than for men.
According to her, these challenges are often linked to structural issues such as gaps in asset ownership, social norms, and limited access to financial data and visibility.
“Sterling’s OneWoman initiative is positioned to bridge this gap by combining financial solutions, mentorship, capacity building, and community support for women across different stages of their journey,” she said at the Funding Her Future Breakfast Dialogue in Lagos.
The session brought together voices from across sectors for a focused and necessary conversation on how to unlock more inclusive and effective financing pathways for women-led businesses in Nigeria.
On his part, the chief executive of Sterling Bank, Mr Abubakar Suleiman, said, “Women-led businesses need the right support systems, the right networks, and the right ecosystem to grow with confidence and scale with resilience.”
By Modupe Gbadeyanka
Alpha Morgan Bank has reaffirmed its commitment to supporting institutions that drive intellectual growth and national development.
The lender gave this reassurance at the commissioning of the Redeemer’s University Business School by Pastor (Mrs) Folu Adeboye, the wife of the General Overseer of the Redeemed Christian Church of God (RCCG), Pastor Enoch Adeboye.
Speaking at the event, the Managing Director of Alpha Morgan Bank, Mr Ade Buraimo, said the company was proud to be associated with the school, noting its commitment to education and institutional development.
As part of its broader focus on knowledge sharing and thought leadership, Alpha Morgan Bank will host its Economic Review Webinar in May 2026, bringing together experts to share insights on key economic trends and opportunities.
The commissioning of the business school was witnessed by distinguished guests, including the Pro-Chancellor and Chairman of the Governing Council of Redeemers University, Professor Oluwatoyin Ogundipe; the Vice Chancellor, Professor Shadrach Olufemi Akindele; Mrs Bola Obasanjo; and other notable dignitaries.
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