Fitch upgrades outlook on 11 Nigerian lenders to positive, but keeps ratings at ‘B’

Fitch Ratings has revised the outlooks on nine Nigerian banks and two bank holding companies to Positive from Stable, citing improvements in Nigeria’s policy framework, foreign exchange reserves and operating environment.

By: Ganiyu Olayinka

The agency affirmed the Long-Term Issuer Default Ratings (IDRs) of all 11 institutions at ‘B’. The outlook change is not an upgrade, but it signals that one could follow.

The institutions are Access Bank, Zenith Bank, First HoldCo (FHC), First Bank of Nigeria (FBN), United Bank for Africa (UBA), Guaranty Trust Holding Company (GTCO), Guaranty Trust Bank (GTB), Fidelity Bank, FCMB, Wema Bank and the Bank of Industry (BOI).

Sovereign move drives the revision

Fitch said the action follows its decision on October 9, 2026, to revise the outlook on Nigeria’s own ‘B’ rating to Positive, reflecting ongoing reforms and greater confidence that policy momentum will survive the upcoming elections. For the commercial banks and holding companies, it said, the sovereign profile and operating environment could become less of a constraint on their standalone credit strength.

For FHC and FBN, the agency also pointed to the restoration of compliance with their total capital adequacy requirements. For BOI, the Positive Outlook reflects the possibility that the government’s capacity to support the policy bank could improve.

National Ratings for all the institutions, and the Government Support Ratings of the eight commercial banks and two holding companies, were unchanged.

Operating environment improving

Fitch said the Naira rose by about 7 per cent between January and September 2026 and the Central Bank of Nigeria continued to build gross reserves. It also cited moderating inflation and room for more monetary easing.

“Inflation increased at the onset of the Iran conflict but reduced slightly to 15.4% in August,” Fitch said, adding that it expects it to ease further. It forecast real GDP growth of 4.3 per cent in 2026, up from 4 per cent in 2025.

The agency noted that the end of long-standing regulatory forbearance on problem loans pushed up impaired-loan ratios at the end of 2025. Large capital raisings to meet new paid-in capital requirements, effective from the end of the first quarter of 2026, have cushioned the impact and left room for lending growth. It said the sector has held up despite demanding rules, including a 45 per cent cash reserve ratio for commercial banks.

Sovereign exposure remains

Fitch said the banks’ creditworthiness is still closely tied to the sovereign because of their large holdings of government securities and cash reserves at the CBN. At the end of 2025, net loans made up between 18 per cent and 41 per cent of total assets, while CBN cash reserves and sovereign fixed-income securities made up between 23 per cent and 45 per cent.

Fitch said the Viability Ratings of Zenith Bank, GTCO and GTB sit one notch below their implied levels because of constraints from the operating environment and sovereign rating. Access Bank’s is also one notch lower because of capitalisation and leverage. The holding-company ratings of FHC and GTCO are aligned with their group Viability Ratings.

FBN and Access Bank

First Bank breached its 15 per cent minimum bank-solo capital adequacy ratio at the end of 2025 after a sharp rise in impaired loans. Fitch said the ratio recovered to 16.7 per cent by mid-2026, helped by strong profits and a small core capital raise.

Access Bank remains above its minimum capital requirement, but Fitch said it has breached the regulatory limit on investments in foreign subsidiaries of 10 per cent of shareholders’ funds. Its bank-solo capital adequacy ratio was 17.4 per cent at the end of the first quarter, only a moderate buffer over the 15 per cent minimum. Fitch expects it to restore compliance and improve the ratio by the end of the first quarter of 2027, including by recalling capital from some subsidiaries and selling small shareholdings.

Bank of Industry

BOI’s rating is driven by its Government Support Rating rather than its own financial strength. Fitch said the government has a high propensity to support it, given 99.9 per cent state ownership, its policy role and its large share of government-guaranteed funding. The government’s ability to help, however, is capped by Nigeria’s own ‘B’ rating.

What could change the ratings?

A downgrade of Nigeria could lead to downgrades of the banks and holding companies. Even without one, Fitch said ratings could come under pressure if problem loans rose materially, capital buffers weakened, or foreign-currency liquidity tightened sharply. For FHC and GTCO, sustained double leverage above 120 per cent could lead to their ratings being set below their group Viability Ratings. BOI could be downgraded if government support weakened, for example through a change in its policy role or a material reduction in state ownership.

Upgrades for Access Bank, Zenith, FHC, FBN, UBA, GTCO and GTB would require an upgrade of Nigeria along with stable financial profiles. Fidelity Bank and FCMB would also need a better assessment of the operating environment, and Wema Bank would need to strengthen its business profile too. A BOI upgrade would require a sovereign upgrade.

Fitch said Nigeria’s improved policy framework and stronger external position have made the country more resilient to shocks, though fiscal pressures and high debt-service costs remain concerns.

Source: Fitch Ratings