Moody’s has placed three Nigerian banks on a review for downgrade, in a further sign of the country’s vulnerability to weakness in the oil price, reports FT.
The review of the long-term ratings of Access Bank, Sterling Bank and Bank of Industry follows on from similar actions at a sovereign level last week, when Moody’s placed Nigeria on a review for downgrade.
“The bank ratings review reflects the fundamental shift in the credit conditions of the global energy sector, which also underpinned global rating actions on several oil-exporting sovereigns,” Moody’s said in an announcement on Tuesday.
The rating agency added that the review was driven both by the “increasing risk” posed by the banks’ exposure to the oil sector, and the “negative implications” of low oil prices for the economy generally. Moody’s also identified a “potential weakening of the Nigerian government’s capacity and willingness to provide support to the banks in times of stress”.
The oil price collapse has had a major impact on Nigeria. In January, the country requested $3.5 billion in loans from the World Bank and African Development Bank to fill a growing gap in its budget.
Moody’s also warned of a shortage in dollar liquidity for the banks, which it said “raises the risk of banks failing to meet their foreign currency liabilities as these fall due.”
While most acute in oil-exporting economies, markets have expressed broader concerns over the impact of falling oil prices on banks this year. In January, three of the largest US banks disclosed jumps in costs for bad energy loans.