Foreign rating agencies shun Nigerian banks


By Stanley Oronsaye July 7, 2010 02:12AM


Rating agencies have scaled down their rating of Nigerian banks, unlike the period between 2005 and 2009 when several rating agencies were over themselves in rating the banks.


Global rating agencies like Standard and Poor’s (S&P), Global Credit Rating Co. (GCR), Fitch, and many other local rating firms were in the forefront of rating Nigerian banks. This was at a time when many Nigerian banks were expanding their global reach, as well as raising funds from the local and international capital market.For instance, as at July 2006, nine Nigerian banks were ranked among the top 1,000 banks in the world, in a listing done by The Banker Magazine.


Suspended ratings

Since last year, many of the rating agencies do not have recent rating data on Nigerian banks. Of the lot, only S&P still maintains a rating of the Nigerian banking industry, with its latest rating information released in June.


It only just released ratings information on Zenith Bank, First Bank, and Guaranty Trust Bank. The rating agency stated recently that it had suspended the rating of Intercontinental Bank since 1 December, 2009.


“The withdrawal is due to a lack of sufficient information from the bank to enable us to maintain surveillance of the ratings,” the firm stated, noting that there is a sharp deterioration in Intercontinental Bank Plc’s financial condition due to very high levels of non-performing loans.Efforts to speak with Lawrence Ndukwe, manager, corporate communications of the bank, were unsuccessful as he did not pick his calls and did not respond to text messages.


Risky banking system

S&P recently released a report that the Nigerian banking industry is still risky, despite the bailout by the Central Bank of Nigeria (CBN).


John Gibling, managing director, financial institutions at the agency, said, “The Nigerian banking system is very high risk. The ratings we have for the banks are in the single B category; it’s a very low level compared to most banks in the world. We continue to see the Nigerian banking system as very high risk. In regulatory reform, there is still a long way to go.”Bisi Ajiboye, head of West Africa regional office of GCR in Lagos, said rating agencies can only work with up-to-date financial information.


According to him, the regulatory requirements that financial reports have to be approved first before publication has made it difficult for rating agencies to access latest financial reports of companies when needed until they are approved by the Central Bank, Securities and Exchange Commission (SEC), or the National Insurance Commission NAICOM).


“It will be a misrepresentation to say that rating agencies are rating only a few Nigerian banks. For instance, Fidelity Bank just released its 2009 result today 6 July. I do not want to say what is responsible for the delay, but rating agencies can only work on available information,” Mr. Ajiboye said.


He faulted the claim by S&P that the Nigerian banking industry was still risky. “Yes, there are elements of risk; there are so many things that are still not clear. We have our own suspicion, but the foreign rating agencies are not based here, so they cannot have good knowledge of the Nigerian situation. The general statement by S&P should not be taken in finality,” he said.






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