Fitch Ratings has upgraded Bank of Industry’s (BoI) National Long-Term Rating to ‘AAA(nga)’ from ‘AA+(nga)’ and affirmed the Nigeria-based bank’s long-term Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook.
According to the rating agency, the upgrade shows that the linkage between the bank and the sovereign has strengthened, as evident in the significant size of the CBN guarantees provided for BOI’s recent external funding. The full list of rating actions shows that “BOI’s long-term IDR and SRF are equalised with the Long-term IDR of the sovereign as we believe that the Nigerian authorities have a high propensity to support BOI.”
Fitch says its assessment primarily reflects the bank’s important and clearly defined policy role in funding economic growth in Nigeria.
It also speaks to the 99.9% state ownership, split between the Ministry of Finance (94.8%) and the Central Bank of Nigeria (CBN: 5.1%) and the entirety of the bank’s wholesale funding being either provided or guaranteed by the Nigerian state.
However, Fitch also views the ability of the authorities to support BOI as limited by Nigeria’s ‘B’ Long-Term IDR.
BOI is Nigeria’s primary development bank, with the mandate of financing the country’s emerging industrial sector.
According to the international rating agency, “BOI’s funding has increased substantially since March 2020, as the bank secured two large syndicated loan facilities of EUR1 billion and USD1 billion from syndicates of commercial banks and multilateral development banks, which are fully guaranteed by the CBN.
“The proceeds of the borrowings are swapped with the CBN, boosting its foreign exchange (FX) reserves and providing BOI with Nigerian naira to support its developmental activities.
“BOI’s management has indicated that this fundraising will serve to expand the bank’s lending to priority sectors.
“It might take BOI substantial time to channel the recently attracted funding to borrowers and as of end-1H21, 48% of BOI’s total assets were kept in liquid government bonds and cash, compared with 20% at end-2019.