Fitch revises outlooks on 11 Nigerian banks, financial institutions to positive

FITCH Ratings has revised the outlooks of 11 Nigerian banks, holding companies and financial institutions to Positive from Stable, raising the prospect of improved credit ratings and access to international funding if the country sustains its economic recovery.

The global credit rating agency, however, affirmed the institutions’ Long-Term Issuer Default Ratings at ‘B’, indicating improved credit prospects, rather than an immediate rating upgrade.

The affected institutions are: Access Bank Plc, Zenith Bank Plc, First Bank of Nigeria Limited, United Bank for Africa Plc, Guaranty Trust Bank Limited, Fidelity Bank Plc, First City Monument Bank Limited, Wema Bank Plc, First HoldCo Plc, Guaranty Trust Holding Company Plc, and Bank of Industry Limited.

The decision follows Fitch’s October 9, revision of Nigeria’s sovereign credit outlook to Positive from Stable, while retaining the country’s Long-Term Issuer Default Rating at ‘B’.

The revised outlook could improve Nigerian banks’ prospects of attracting foreign investors and securing international financing. However, any reduction in borrowing costs would depend on actual rating upgrades, individual banks’ financial strength and prevailing market conditions.

Fitch attributed the improved assessment to Nigeria’s economic reforms, foreign exchange market adjustments, stronger external reserves and expectations of continued macroeconomic stabilisation.

The agency noted that the naira appreciated by approximately seven per cent in the first nine months of 2026, while the Central Bank of Nigeria continued efforts to strengthen the country’s external reserves.

It also reported that headline inflation moderated to 14.63 per cent in September, while projecting economic growth of 4.3 per cent for 2026, up from four per cent in 2025.

For banks, greater exchange rate stability could reduce uncertainty surrounding foreign currency assets and liabilities, while moderating inflation and stronger economic activity could improve borrowers’ repayment capacity and stimulate demand for credit.

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Despite the improved outlook, Fitch identified significant exposure to government securities and cash reserves held with the CBN as a major vulnerability for Nigerian lenders.

At the end of 2025, sovereign fixed-income securities and cash reserves held with the apex bank accounted for between 23 per cent and 45 per cent of the total assets of the affected commercial banks.

Their combined sovereign exposures were equivalent to approximately 150 per cent to 500 per cent of Fitch Core Capital, underscoring the sector’s sensitivity to changes in the Federal Government’s creditworthiness.

Although government securities provide investment income and liquidity-management opportunities, substantial exposure could expose banks to losses or balance-sheet pressure if the sovereign’s financial position deteriorates.

Fitch also noted that the withdrawal of longstanding regulatory concessions on impaired-loan classification contributed to higher non-performing loan ratios at the end of 2025.

However, capital raised by banks to meet the CBN’s revised minimum capital requirements has strengthened their capacity to absorb potential losses and support lending.

The agency highlighted the sector’s resilience despite the 45 per cent cash reserve ratio imposed on commercial banks, which restricts the proportion of deposits available for lending and other activities.

At the individual-bank level, First Bank of Nigeria restored compliance with its minimum bank-level capital adequacy requirement in the first half of 2026. Its capital adequacy ratio stood at 16.7 per cent at the end of June, above the regulatory minimum of 15 per cent.

Access Bank, meanwhile, faces a regulatory challenge over investments in foreign subsidiaries. Fitch said the lender had exceeded the regulatory limit on such investments, although its capital adequacy ratio stood at 17.4 per cent at the end of the first quarter of 2026.

The agency expects corrective measures to strengthen the bank’s capital position and restore compliance by the end of the first quarter of 2027.

For Bank of Industry, the Positive outlook reflects expectations that the Federal Government’s capacity to provide financial support could improve alongside Nigeria’s sovereign credit profile.

Fitch said further rating upgrades would depend on an improvement in Nigeria’s sovereign rating and the ability of individual institutions to maintain satisfactory financial profiles.

Conversely, deteriorating loan quality, weaker capital buffers or severe foreign currency liquidity constraints could trigger negative rating actions.

For investors, the revised outlooks signal improving confidence in Nigeria’s banking sector but do not eliminate risks associated with sovereign exposure, asset quality and regulatory requirements. The institutions retain their ‘B’ ratings, with future upgrades dependent on sustained economic improvement and the financial resilience of individual lenders.