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

NBA Demands Suspension of Controversial Tax Laws

Published

1 hour ago

24/12/2025

Modupe Gbadeyanka

By Modupe Gbadeyanka

The federal government has been asked by the Nigerian Bar Association (NBA) to suspend the implementation of the controversial tax laws.

In a reaction to the tax reform acts, the president of the group, Mr Afam Osigwe (SAN), the suspension of the laws would allow for a proper investigation into allegations of alterations in the gazetted and harmonised copies.

A member of the House of Representatives, Mr Abdussamad Dasuki, alleged that some parts of the laws passed by the parliament were different from the gazetted copy.

To address the issues raised, the NBA said it is “imperative that a comprehensive, open, and transparent investigation be conducted to clarify the circumstances surrounding the enactment of the laws and to restore public confidence in the legislative process.”

“Until these issues are fully examined and resolved, all plans for the implementation of the Tax Reform Acts should be immediately suspended,” the association declared.

It noted that the controversies “raise grave concerns about the integrity, transparency, and credibility of Nigeria’s legislative process.”

“These developments strike at the very heart of constitutional governance and call into question the procedural sanctity that must attend lawmaking in a democratic society,” it noted.

“Legal and policy uncertainty of this magnitude has far-reaching consequences. It unsettles the business environment, erodes investor confidence, and creates unpredictability for individuals, businesses, and institutions required to comply with the law. Such uncertainty is inimical to economic stability and should have no place in a system governed by the rule of law.

“Nigeria’s constitutional democracy demands that laws, especially those with profound economic and social implications, emerge from processes that are transparent, accountable, and beyond reproach. Anything short of this undermines public trust and weakens the foundation upon which lawful governance rests.

“We therefore call on all relevant authorities to act swiftly and responsibly in addressing this controversy, in the overriding interest of constitutional order, economic stability, and the preservation of the rule of law,” the organisation stated.

Economy

MRS Oil, Two Others Raise NASD Bourse Higher by 0.52%

Published

3 hours ago

24/12/2025

Adedapo Adesanya

By Adedapo Adesanya

Demand for hot stocks, including MRS Oil Plc, buoyed the NASD Over-the-Counter (OTC) Securities Exchange by 0.52 per cent on Tuesday, December 23.

The energy company was one of the three price gainers for the session as it chalked up N19.69 to sell at N216.59 per share versus the previous day’s value of N196.90 per share.

Further, FrieslandCampina Wamco Nigeria Plc gained N2.95 to close at N56.75 per unit versus N53.80 per unit and Golden Capital Plc appreciated by 84 Kobo to N9.29 per share from Monday’s N8.45 per share.

Consequently, the market capitalisation went up by N10.95 billion to N2.125 trillion from N2.125 trillion and the NASD Unlisted Security Index (NSI) rose by 18.31 points to 3,570.37 points from 3,552.06 points.

Yesterday, the NASD bourse recorded a price loser, the Central Securities Clearing System Plc (CSCS), which gave up 17 Kobo to close at N33.70 per unit against the previous trading value of N33.87 per unit.

The volume of securities traded at the session went down by 97.6 per cent to 297,902 units from the previous day’s 12.6 million units, the value of securities decreased by 98.5 per cent to N10.5 million from N713.6 million, and the number of deals remained flat at 32 deals.

By value, Infrastructure Credit Guarantee Company (InfraCredit) Plc ended as the most actively traded stock on a year-to-date basis with 5.8 billion units exchanged for N16.4 billion. This was followed by Okitipupa Plc, which traded 178.9 million units valued at N9.5 billion, and MRS Oil Plc with 36.1 million units worth N4.9 billion.

In terms of volume, also on a year-to-date basis, InfraCredit Plc led the chart with a turnover of 5.8 billion units traded for N16.4 billion. Industrial and General Insurance (IGI) Plc ranked second with 1.2 billion units sold for N420.7 million, while Impresit Bakolori Plc followed with the sale of 536.9 million units valued at N524.9 million.

Economy

NGX All-Share Index Soars to 153,354.13 points

Published

4 hours ago

24/12/2025

Dipo Olowookere

By Dipo Olowookere

It was another bullish trading session for the Nigerian Exchange (NGX) Limited as it closed higher by 0.59 per cent on Tuesday.

The market further rallied due to continued interest in large and mid-cap stocks on the exchange by investors rebalancing their portfolios for the year-end.

Yesterday, Aluminium Extrusion sustained its upward trajectory after it further appreciated by 9.96 per cent to N14.90, as Austin Laz gained 9.81 per cent to close at N2.91, Custodian Investment improved by 9.69 per cent to N38.50, and First Holdco soared by 9.35 per cent to N50.30.

Conversely, Royal Exchange declined by 7.22 per cent to N1.80, Champion Breweries shrank by 6.57 per cent to N15.65, NASCON lost 5.36 per cent to trade at N105.05, Sovereign Trust Insurance depreciated by 5.28 per cent to N3.77, and Japaul went down by 4.51 per cent to N2.33.

At the close of business, 29 shares ended on the gainers’ table and 27 shares finished on the losers’ log, representing a positive market breadth index and bullish investor sentiment.

This raised the All-Share Index (ASI) by 895.06 points to 153,354.13 points from 152,459.07 points and lifted the market capitalisation by N579 billion to N97.772 trillion from the previous day’s N97.193 trillion.

VFD Group finished the day as the busiest stock after it recorded a turnover of 192.0 million units worth N2.1 billion, GTCO exchanged 63.5 million units valued at N5.6 billion, Access Holdings traded 49.8 million units for N1.0 billion, First Holdco sold 45.8 million units valued at N2.3 billion, and Secure Electronic Technology transacted 38.3 million units worth N28.4 million.

In all, market participants bought and sold 677.4 million units valued at N20.8 billion in 27,589 deals compared with the 451.5 million units worth N13.0 billion traded in 33,327 deals on Monday, showing an improvement in the trading volume and value by 50.03 per cent and 60.00 per cent apiece, and a shortfall in the number of deals by 17.22 per cent.