Agusto & Co. upgrades the rating assigned to the Bank of Industry Limited (‘BOI’ or ‘the Bank’) to ‘Aaa’.
The assigned rating reflects the Bank’s strategic role and enhanced capabilities in implementing the Federal Government of Nigeria’s (FGN) economic recovery and growth plan as well as the country’s industrial revolution plan.
The rating assigned also considers the Bank’s good capitalisation, good liquidity profile and experienced management team. In addition, the rating assigned is reflective of the strong support that BOI receives from its two key shareholders: the Ministry of Finance Incorporated (the investment vehicle of the Ministry of Finance) and the Central Bank of Nigeria (CBN).
The Bank’s ability to refinance has remained strong over the years, underpinned by a sovereign guarantee provided by the Ministry of Finance Incorporated on its debt obligations. As a result, in FYE 2020, BOI consummated €1 billion and another $1 billion syndicated guaranteed borrowings from a consortium of lenders including Credit Suisse, AFREXIM, Rand Merchant Bank and SMBC Bank International Plc.
Excluding equity support, the CBN also provides financing through its intervention programs and acts as a counterparty in BOI’s foreign currency hedging contracts. However, constraining these positives is Nigeria’s slowly recovering economy following the outbreak of the COVID-19 pandemic. In addition, the Bank must integrate environmental, social and governance (ESG) metrics into its loan criteria in order to appeal to the growing green investors’ community.
Our outlook for the Bank is stable and reflects our expectations of stronger capitalisation, enhanced by retained earnings and anticipated capital injection by a significant shareholder. We also expect an uptick in profitability metrics, acceptable asset quality indicators and a good liquidity profile.