Fitch Downgrades BoI to ‘B+’, Stable Outlook

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Nume Ekeghe

Fitch Ratings has downgraded BOI’s long-term Issuer Default Rating (IDR) to ‘B+’ from ‘BB-‘ and also assigned a support rating of ‘4’ from ‘3’ to the Bank following the downgrade of the Nigerian sovereign rating to ‘B+’ from ‘BB-‘.

Fitch, in a statement monday, also assigned a stable outlook to the BoI, in line with the outlook on the sovereign.

The state-owned development bank BOI’s ratings, according to Fitch, are driven by and equalised with Nigeria’s sovereign ratings.

“The stable outlook on BOI’s long-term IDR reflects the stable outlook on Nigeria’s sovereign rating. BOI’s Long-Term IDR is at the bank’s Support Rating Floor (SRF) of ‘B+’, 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 ‘B+’.

“Although the sovereign’s ability has weakened, particularly in foreign currency, support would still be available to a limited extent, given BOI’s relative size. We also believe that the state’s propensity to provide support remains high, reflecting the state’s 99.9 per cent ownership, BOI’s policy role and the bank’s strategic importance to economic and industrial development.

“BOI’s funding is long-term and almost exclusively sourced from the Central Bank of Nigeria (CBN). BOI’s regulatory Basel II total capital adequacy ratio stood at a healthy 47.3 per cent at end-March 2016 and its impaired loan ratio was 2.6 per cent. BOI’s National Ratings reflect the bank’s creditworthiness relative to the best credits in Nigeria.

“BOI is 94.8 per cent owned by the Ministry of Finance and 5.1 per cent by CBN. Fitch views BOI as a policy bank, reflecting its key role in the state’s structural and economic reforms, particularly in developing the non-oil sector. The propensity to support is underpinned by the bank’s funding profile, as it is majority-funded by a N535 billion zero coupon bond due in 2025 issued to the CBN. “BOI is diversifying its funding but Fitch does not view this as a reason for any reduction in the likelihood of state support,” it stated.