Banking Crises: Nigeria’s rating drops

By Babajide Komolafe
The sacking of the five banks’ chief executives has  increased Nigeria’s credit risk in the international market .  This means it is now    riskier for foreigners to do business in Nigeria.

This development was announced by  Standard & Poor- a leading provider of financial market intelligenc. yesterday.

It reviewed  downward the nations’ foreign currency credit rating from B-plus from BB-minus S&P in a statement said that,  “Nigeria, sub-Saharan Africa’s second-biggest economy, has a stable outlook,  adding that the financial, economic and political risks are balanced by a strong external and fiscal balance sheet.

“The lowering of the sovereign rating on Nigeria reflects our view of the government’s reduced fiscal flexibility due to costs associated with its recent bail-out of five large domestic banks, and also the fall-off in government oil revenue,” the firm said in a statement.

“In our opinion, the central bank’s action has begun a welcome restructuring of Nigeria’s banking system, but it also reveals deep problems in Nigeria’s credit markets, with the extent of problem loans beyond our previous estimates,” S&P said.

Standard & Poor’s is a leading provider of financial market intelligence. The world’s foremost source of credit ratings, indices, investment research, risk evaluation and data, Standard & Poor’s provides financial decision-makers with the intelligence they need to feel confident about their decisions.

Many investors know Standard & Poor’s for its respected role as an independent provider of credit ratings and as the home of the S&P 500 benchmark index. But Standard & Poor’s global organization also: Provides a wide array of financial data and information,

Is the largest source of independent equity research and a leader in mutual fund information and analysis.
But another rating agency, Fitch Ratings however said earlier on Friday it did not see any immediate sovereign rating implications from the central bank’s actions.

The firm applauded the bailout and said it did not think further government assistance on the same scale was likely.