Economy

Fitch Fears Another Naira Devaluation, Downgrades 3 Banks

Published

6 years ago

04/04/2020

By Dipo Olowookere

The ratings of three banks in Nigeria have been downgraded Fitch Ratings amid fears that their operations would be negatively impacted by a further devaluation of the Naira.

A statement issued by the agency said the banks and others in the country will face material pressures from a weaker operating environment over the next few months given the price of crude oil and the impact of the COVID-19 pandemic on individuals and businesses.

The downgraded lenders are Zenith Bank, Guaranty Trust Bank (GTBank) and United Bank for Africa (UBA). Their ratings were lowered to Long-Term Issuer Default Rating (IDR) ‘B’ and Viability Rating (VR) ‘b’.

In the statement, Fitch said it has also placed the Long-Term IDRs, VRs and National Ratings of all 10 rated Nigerian banks (excluding Stanbic IBTC Holdings and Stanbic IBTC Bank, which are not assigned VRs and IDRs) on Rating Watch Negative (RWN).

According to the rating firm, before the current crisis, its outlook for the Nigerian banking sector was negative, which reflected tough operating conditions, including slow GDP growth, rising regulatory risks and potential performance pressures.

Fitch said it expects banks’ credit profiles to suffer from weaker asset quality and reduced profitability in the more severe downside scenario.

“Based on experiences from 2015/2016, we expect the current oil price shock to adversely impact the oil and gas sector.

“This sector accounts for around 30 percent of the banking sector’ gross loans, of which a large proportion was restructured during the previous crisis (some are still classified as Stage 2 under IFRS 9).

“Our stress tests show that asset-quality risks arising from deterioration of the banks’ oil and gas exposures are the biggest threat to their ratings.

“Additionally, we expect the non-oil segment to be impacted by the slower economy, but also due to the COVID-19 crisis, which could severely affect communities and industries. It would particularly test the quality of consumer and SME loans,” it said.

Fitch noted that lower oil revenues also raise the prospect of a material Naira devaluation, which would put pressure on the banks’ regulatory capital ratios.

However, it stated that given the banks’ net long foreign-currency positions, its stress tests show that in most cases the impact on Fitch Core Capital (FCC) ratios is tolerable under several scenarios.

“Nigerian banks have reasonable loss absorption buffers, underpinned by strengthened capitalisation since the last crisis.

“In the near-term, healthy earnings will continue to absorb larger credit losses but future profits will be under pressure from slowing loan growth, reduced client activity and higher levels of provisioning for expected credit losses under the IFRS 9 accounting framework,” it noted.

Fitch added that, “On balance, the near-term impact from the oil price shock and COVID-19 on funding and liquidity is likely to be tolerable.

“The primary risk is that lower oil revenues (and Nigeria’s falling FX reserves) could limit banks’ access to foreign currency (FC) liquidity.

“Furthermore, adverse global conditions could impede some banks in raising external financing. Local-currency liquidity remains strong with banks funded mainly by low-cost customer deposits.”

Fitch said it will resolve the RWN once it has assessed how this economic shock impacts the banking system and the credit profiles of each bank, as well as the banks’ ability to adapt.

The Central Bank of Nigeria (CBN) recently announced relief measures, which should alleviate some near-term asset-quality pressures.

Some of these include requesting banks to restructure loan tenors and terms for consumers and business that are most affected, particularly borrowers in the oil and gas, agriculture and manufacturing sectors.

Economy

Tinubu Presents N58.47trn Budget for 2026 to National Assembly

Published

9 hours ago

19/12/2025

Adedapo Adesanya

By Adedapo Adesanya

President Bola Tinubu on Friday presented a budget proposal of N58.47 trillion for the 2026 fiscal year titled Budget of Consolidation, Renewed Resilience and Shared Prosperity to a joint session of the National Assembly, with capital recurrent (non‑debt) expenditure standing at 15.25 trillion, and the capital expenditure at N26.08 trillion, while the crude oil benchmark was pegged at $64.85 per barrel.

Business Post reports that the Brent crude grade currently trades around $60 per barrel. It is also expected to trade at that level or lower next year over worries about oil glut.

At the budget presentation today, Mr Tinubu said the expected total revenue for the year is N34.33 trillion, and the proposal is anchored on a crude oil production of 1.84 million barrels per day, and an exchange rate of N1,400 to the US Dollar.

In terms of sectoral allocation, defence and security took the lion’s share with N5.41 trillion, followed by infrastructure at N3.56 trillion, education received N3.52 trillion, while health received N2.48 trillion.

Addressing the lawmakers, the President described the budget proposal as not “just accounting lines”.

“They are a statement of national priorities,” the president told the gathering. “We remain firmly committed to fiscal sustainability, debt transparency, and value‑for‑money spending.”

The presentation came at a time of heightened insecurity in parts of the country, with mass abductions and other crimes making headlines.

Outlining his government’s plan to address the challenge, President Tinubu reminded the gathering that security “remains the foundation of development”.

He said some of the measures in place to tame insecurity include the modernisation of the Armed Forces, intelligence‑driven policing and joint operations, border security, and technology‑enabled surveillance and community‑based peacebuilding and conflict prevention.

“We will invest in security with clear accountability for outcomes—because security spending must deliver security results,” the president said.

“To secure our country, our priority will remain on increasing the fighting capability of our armed forces and other security agencies by boosting personnel and procuring cutting-edge platforms and other hardware,” he added.

Economy

PenCom Extends Deadline for Pension Recapitalisation to June 2027

Published

18 hours ago

19/12/2025

Aduragbemi Omiyale

By Aduragbemi Omiyale

The deadline for the recapitalisation of the Nigerian pension industry has been extended by six months to June 2027 from December 2026.

This extension was approved by the National Pension Commission (PenCom), the agency, which regulates the sector in the country.

Addressing newsmen on Thursday in Lagos, the Director-General of PenCom, Ms Omolola Oloworaran, explained that the shift in deadline was to give operators more time to boost the capital base, dismissing speculations that the exercise had been suspended.

“The recapitalisation has not been suspended. We have communicated the requirements to the Pension Fund Administrators (PFAs), and we expect every operator to be compliant by June 2027. Anyone who is not compliant by then will lose their licence,” Ms Oloworaran told journalists.

She added that, “From a regulatory standpoint, our major challenge is ensuring compliance. We are working with ICPC, labour and the TUC to ensure employers remit pension contributions for their employees.”

The DG noted that engagements with industry operators indicated broad acceptance of the policy, with many PFAs already taking steps to raise additional capital or explore mergers and acquisitions.

“You may see some mergers and acquisitions in the industry, but what is clear is that the recapitalisation exercise is on track and the industry agrees with us,” she stated.

PenCom wants the PFAs to increase their capital base and has created three categories, with the first consists operators with Assets Under Management of N500 billion and above. They are expected to have a minimum capital of N20 billion and one per cent of AUM above N500 billion.

The second category has PFAs with AUM below N500 billion, which must have at least N20 billion as capital base.

The last segment comprises special-purpose PFAs such as NPF Pensions Limited, whose minimum capital was pegged at N30 billion, and the Nigerian University Pension Management Company Limited, whose minimum capital was fixed at N20 billion.

Economy

Three Securities Sink NASD Exchange by 0.68%

Published

18 hours ago

19/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Three securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 0.68 per cent on Thursday, December 18.

According to data, Central Securities Clearing System (CSCS) Plc led the losers’ group after it slipped by N2.87 to N36.78 per share from N39.65 per share, Golden Capital Plc depreciated by 77 Kobo to end at N6.98 per unit versus the previous day’s N7.77 per unit, and FrieslandCampina Wamco Nigeria Plc dropped 19 Kobo to sell at N60.00 per share versus Wednesday’s closing price of N60.19 per share.

At the close of business, the market capitalisation lost N16.81 billion to finish at N2.147 billion compared with the preceding session’s N2.164 trillion, and the NASD Unlisted Security Index (NSI) declined by 24.76 points to 3,589.88 points from 3,614.64 points.

Yesterday, the volume of securities bought and sold increased by 49.3 per cent to 30.5 million units from 20.4 million units, the value of securities surged by 211.8 per cent to N225.1 million from N72.2 million, and the number of deals jumped by 33.3 per cent to 28 deals from 21 deals.

Infrastructure Credit Guarantee Company (InfraCredit) Plc remained the most traded stock by value with a year-to-date sale of 5.8 billion units valued at N16.4 billion, followed by Okitipupa Plc with 178.9 million units transacted for N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.

Similarly, InfraCredit Plc ended as the most traded stock by volume on a year-to-date basis with 5.8 billion units traded for N16.4 billion, trailed by Industrial and General Insurance (IGI) Plc with 1.2 billion units sold for N420.7 million, and Impresit Bakolori Plc with 536.9 million units exchanged for N524.9 million.