A Review of the Nigerian Energy Industry

Nigeria: Fitch assigns BB rating to Bank of Industry

Bank of Industry
Bank of Industry

28 June 2015, Lagos — Fitch Ratings has assigned Bank of Industry Limited (BOI) a Long-term Issuer Default Rating (IDR) of ‘BB-‘ with a Negative Outlook and a Short-term IDR of ‘B’.

The rating agency also assigned BOI a National Long-term rating of ‘AA+ (nga)’ and National Short-term rating of ‘F1+(nga)’.

According to a statement issued by Fitch in London on Thursday, key rating drivers IDRs, support rating floor and national ratings BOI’s ratings are driven by and equalised with Nigeria’s sovereign ratings (BB-/Negative/B).

Fitch was also of the view there is a moderate probability that the Federal Government would provide extraordinary support to BOI, adding that the moderate probability of support is reflected in BOI’s Support Rating (SR) of ‘3’.

“The Negative Outlook on BOI’s Long-term IDRs reflects the Negative Outlook on the sovereign rating. BOI’s Long-term IDR is at its Support Rating Floor (SRF) of ‘BB-‘, which considers Nigeria’s ability to provide such support in a timely manner as and when required, as indicated by “Nigeria’s Long-term foreign currency IDR of ‘BB-‘.

We also believe that its propensity to provide such support is high, reflecting its 99.9 percent ownership, BOI’s policy role and the bank’s strategic importance to economic and industrial development.

“BOI is also highly reliant on the Central Bank of Nigeria (CBN) for its funds. The National Ratings reflect the bank’s creditworthiness relative to the best credits in Nigeria,” the rating agency stated.

Since BOI was established in 2001 by the government with the sole mandate of financing local industries, Fitch added that “We consider BOI a policy bank given its ownership and its key role in the state’s structural and economic reforms, particularly in developing the non-oil sector.

Fitch further pointed out that rating sensitivities IDRs, support rating, support rating floor and national ratings BOI’s IDRs, SR and SRF could be sensitive to any weakening of the ability or willingness of Nigeria to support BOI, the former being reflected by Nigeria’s sovereign rating.

It added that the ratings could also be downgraded in the event of material change in the government ownership and/or any change in the bank’s policy role.

Nonetheless, Fitch equally said an upgrade of the Nigerian sovereign would not necessarily lead to an upgrade of BOIs IDRs, stressing that BOI’s National Ratings are sensitive to any change in Fitch’s opinion of BOI’s creditworthiness relative to the best credits in Nigeria.
*Sola Alabadan – Daily Independent

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