CBN silent as Fitch raises concerns over banks credit ratings

The Central Bank of Nigeria (CBN) has remained silent over the concerns raised by global financial rating agency, Fitch Ratings, that the apex bank may lacked the ability to support the Nigerian banking industry.

Recall that Fitch had on Tuesday in its latest credit ratings for Access Bank, Guaranty Trust Bank (GTBank) and United Bank for Africa (UBA), said credit rating of each bank is constrained by the current operating environment in the country.

The global rating agency had averred that the fragile economic recovery restrains banks’ growth prospects and asset quality, adding that operating conditions are still difficult for banks.

The report stated that despite stronger oil prices in second half of 2018 (H2’18) supporting economic growth, credit demand is still weak and banks face pressure on margins and capital.

It said the sovereign support to Nigerian banks cannot be relied on given Nigeria’s weak ability to provide support, particularly in foreign currency. “In addition, there are no clear messages of support from the authorities regarding their willingness to support the banking system.

“Therefore, the Support Rating Floor of all Nigerian banks is ‘No Floor’ and all Support Ratings are ‘5’. This reflects our view that senior creditors cannot rely on receiving full and timely extraordinary support from the Nigerian sovereign if any of the banks become non-viable,” Fitch noted.

Reacting to the report, industry experts frowned at the apparent dormant regulatory climate in the sector, citing examples with the recent way and manner Skye Bank was rescued, rebranded and given fresh lifeline of N786bn when the same board appointed by the same CBN had blown away the initial N100bn injected in the same bank when it was first rescued in 2016.

They also expressed dissatisfaction with the way about 158 microfinance banks, 22 finance houses and a number of mortgage banks went down the drain at a time the country is harping on financial inclusion.

The experts kicked against the new recapitalization amount for MFBs, saying it is too much and will discourage growth in Small and Medium Enterprises (SMEs) who rely on the services of MFBs to run their businesses.

Meanwhile, several attempts to get the CBN to comment on the development was abortive.