Global credit ratings and research firm, Fitch Ratings, has upgraded the National Long-Term Rating of the Bank of Industry (BoI) to AAA(nga) from AA+(nga).
The firm disclosed this in a report while affirming the BoI’s Long-Term Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook.
It added that the upgrade was due largely to the perceived support from authorities in Nigeria “for the bank’s local currency obligations”.
The report said, “The affirmation of BOI’s ‘B’ Long- and Short-Term IDRs, ‘B’ Support Rating Floor (SRF) and Support Rating of ‘4’ reflects Fitch’s view of potential support the bank could receive from the Nigerian authorities in case of need. The Stable Outlook on BOI’s Long-Term IDR mirrors that on the sovereign.”
It noted that the possibility of the Nigerian government coming to the rescue of the bank in times of need was “high”, which was proof of the bank’s “important and clearly defined policy role in funding economic growth in Nigeria.”
Support from the Nigerian government was also highly possible, according to the rating company, due to the bank’s split ownership between the finance ministry (94.8 percent) and the Central Bank of Nigeria (CBN; 5.1 percent).
“However, Fitch also views the ability of the authorities to support BOI as limited by Nigeria’s ‘B’ Long-Term IDR,” it added.
Highlighting the bank’s role in bolstering government policies and driving economic growth, the rating firm said that the BoI has a mandate of supporting Nigeria’s industrial sector and supplying “counter-cyclical loans”.
It said that the bank’s funding had seen an uptick since March 2020, securing two loans from external sources including commercial banks and multilateral development banks to the tune of 1 billion euros and $1 billion, with a guarantee from 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,” the rating agency said.
“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.”