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S&P Issues Red Alert on Nigerian Banking Sector

US rating agency, Standard & Poors revised its counter-party credit ratings for Skye Bank.
The new analysis released on July 12, 2016, lowers the ratings of the banking group to CCC- on the long term and C on the short term.
S&P’s decision occurred after the Central Bank indicated that the bank failed to meet requirements of its regulatory prudential ratios.
In this context, Skye Bank’s Board and Management have been revoked; however there is still no clear plan as to how the bank will turn around.
The situation, according to S&P, should worsen the bank’s inability to pay its short-term debt and lead to default in the next six months.
Now, observers fear a domino effect in the Nigerian finance chain. In March 2016, S&P issued a negative outlook for six other local banks.
This fear is not shared by all as some believe that the regulator should have been more accommodating to the sector which is facing lots of troubles. Others welcome the Central Bank’s decision, saying it should put some order in the sector.
On the Nigerian Stock Exchange where it is listed, investors did not wait and Skye Bank’s share plunged 72% since its 12-month peak on 1 September, 2015 (N2.67). On July 13, it traded at 70 kobo (N0.70) after dropping by about 30% since Monday.
This is its lowest level since 2006, according to data provided by Bloomberg.
—Idriss Linge

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