Moody’s might cut Nigerian banks

Moody's Investors Service said it placed on review for downgrade the long-term ratings of three Nigerian banks: Access Bank plc (Ba3/B1, b2), Sterling Bank plc (B2, b3) and Bank of Industry (Ba3).

The reviews are driven by the agency’s assessment of the potential weakening of the Nigerian government's capacity and willingness to provide support to the banks in times of stress, if needed.

At the same time, the baseline credit assessments of Access Bank and Sterling Bank, the two commercial banks Moody's rates in Nigeria, were also placed under review for downgrade to reflect: (a) the increasing risk posed by the direct and indirect exposures of the banks to the oil sector; and (b) the negative implications of low oil prices on the domestic economy more broadly, as reduced fiscal spending and currency devaluation pose additional asset quality risks as well as funding and liquidity challenges.

The reviews were triggered by the weakening of Nigeria's credit profile, as captured by Moody's placement of the government's issuer rating on review for downgrade on March 4.

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