Download Tag: Nigeria

Funding and liquidity is a strength to the rating. AIICO Capital’s funding structure largely comprises guaranteed income liabilities, with the underlying risks retained by the Manager. As at end-FY21, the liabilities stood at N39.8 billion and reflected a c.19% decline from the prior year due to major withdrawals by corporate entities that dominate the portfolio. These funds are non-core and are largely sensitive to movements in interest rates. Concentration risk in the funding base is high as top 20 depositors accounted for c.87% of FUM as at end-FY21. However, the Manager’s liquidity profile was good during the review period as GCR liquid assets covered the guaranteed Income liabilities 1x in FY21.

Greenwich MB’s funding and liquidity is robust and considered appropriate for its current operational scale. As of 30 June 2022, the bank was largely funded by customer deposits, which accounted for 81% of the funding base (FY21: 91.7%). Underpinned by the implementation of its outlined deposit mobilisation strategy, customer deposits increased significantly to N54.5bn as of 30 June 2022 from N509.8m in December 2020. However, concentration risk is evident, with the top twenty depositors accounting for 76.9% of the deposit book as of 30 June 2022 (FY21: 73.3%; FY20: 96.6%) with the bulk being wholesale funding from financial institutions. Although this is typical of Nigerian merchant banks, management envisages further diversification going forward as the bank intensifies the onboarding of more corporate customers.

Sterling Bank PLC is a standalone bank operating in Nigeria. Initially licensed as Nigeria’s first Merchant Bank, owned by the government post-independence, Sterling Bank has evolved over the decades, operating a national commercial banking license and publicly listed on the Nigerian Stock Exchange (NGX). Geographic exposure is limited to Nigeria, and about 85.9% of the bank’s credit exposures are domiciled in the South-South and South-West regions of the country as at FY21.

InfraCredit was incorporated as a limited liability company in October 2016, under a collaborative arrangement between Nigeria Sovereign Investment Authority (“NSIA”) and GuarantCo, with the sole mandate of providing guarantees to enhance the credit quality of local currency debt instruments (mainly bonds) issued by corporate entities to finance eligible infrastructure projects in Nigeria. InfraCredit commenced operations in 2017 and has its operational office in Lagos, Nigeria.

InfraCredit was conceptualised to have a blend of Nigerian public or government institutions, international Development Financial Institutions (“DFIs”), and private institutional investor base. Currently, InfraCredit is owned by four institutions, one of which is Federal Government of Nigeria (“FGN”) related entity, NSIA, with 38.56% equity stake. The other shareholders are InfraCo Africa Investment Limited ("InfraCo”), Africa Finance Corporation ("AFC"), and Leadway Assurance Company Limited (“Leadway”) with 28.64%, 27.24% and 5.56% equity stakes respectively as of 31 December 2021. Per its business plan and subsisting Shareholders’ Agreement (“SA”), the public institution’s stake in InfraCredit is expected to moderate to 25% over the medium term. However, NSIA and InfraCo have equal voting rights in InfraCredit following the agreement that NSIA will defer the rights and liabilities on a portion of its shares. Thus, voting rights for NSIA and InfraCo equals 31.8% each, while AFC and Leadway have 30.2% and 6.2% voting rights respectively.

Capitalisation is a positive ratings factor. Jaiz Bank’s GCR Capital Ratio of 29.2% as at end-FY21 improved from 23.1% in the prior year and places it in the intermediate level of GCR’s assessment. This was supported by a N3.3bn capital injection by an existing shareholder in FY21. GCR’s view on capital and leverage is positive on the back of an anticipated capital injection which could raise the Bank’s GCR Capital Ratio above 30% over the next 12-18 months.