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Foreign rating agencies shun
Nigerian banks
By Stanley Oronsaye
July 7, 2010 02:12AM
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Rating agencies have scaled down
their rating of Nigerian banks,
unlike the period between 2005
and 2009 when several rating
agencies were over themselves in
rating the banks.
Global rating agencies like Standard
and Poor's (S&P), Global Credit
Rating Co. (GCR), Fitch, and many
other local rating firms were in the
forefront of rating Nigerian banks.
This was at a time when many
Nigerian banks were expanding
their global reach, as well as raising
funds from the local and
international capital market.
For instance, as at July 2006, nine
Nigerian banks were ranked among
the top 1,000 banks in the world, in
a listing done by The Banker
Magazine.
Suspended ratings
Since last year, many of the rating
agencies do not have recent rating
data on Nigerian banks. Of the lot,
only S&P still maintains a rating of
the Nigerian banking industry, with
its latest rating information
released in June.
It only just released ratings
information on Zenith Bank, First
Bank, and Guaranty Trust Bank. The
rating agency stated recently that
it had suspended the rating of
Intercontinental Bank since 1
December, 2009.
"The withdrawal is due to a lack of
sufficient information from the
bank to enable us to maintain
surveillance of the ratings," the firm
stated, noting that there is a sharp
deterioration in Intercontinental
Bank Plc's financial condition due to
very high levels of non-performing
loans.
Efforts to speak with Lawrence
Ndukwe, manager, corporate
communications of the bank, were
unsuccessful as he did not pick his
calls and did not respond to text
messages.
Risky banking system
S&P recently released a report that
the Nigerian banking industry is still
risky, despite the bailout by the
Central Bank of Nigeria (CBN).
John Gibling, managing director,
financial institutions at the agency,
said, "The Nigerian banking system
is very high risk. The ratings we
have for the banks are in the single
B category; it's a very low level
compared to most banks in the
world. We continue to see the
Nigerian banking system as very
high risk. In regulatory reform,
there is still a long way to go."
Bisi Ajiboye, head of West Africa
regional office of GCR in Lagos, said
rating agencies can only work with
up-to-date financial information.
According to him, the regulatory
requirements that financial reports
have to be approved first before
publication has made it difficult for
rating agencies to access latest
financial reports of companies
when needed until they are
approved by the Central Bank,
Securities and Exchange
Commission (SEC), or the National
Insurance Commission NAICOM).
"It will be a misrepresentation to
say that rating agencies are rating
only a few Nigerian banks. For
instance, Fidelity Bank just released
its 2009 result today 6 July. I do
not want to say what is responsible
for the delay, but rating agencies
can only work on available
information," Mr. Ajiboye said.
He faulted the claim by S&P that
the Nigerian banking industry was
still risky. "Yes, there are elements
of risk; there are so many things
that are still not clear. We have our
own suspicion, but the foreign
rating agencies are not based here,
so they cannot have good
knowledge of the Nigerian
situation. The general statement by
S&P should not be taken in finality,"
he said.

those banks and their cooked books