Economy
Zenith, Access, FBN holdings, UBA can stand N450/$ depreciation–Fitch
Fitch Rating Agency has said that Zenith Bank, Access, FBN Holdings, Guaranty Trust Bank and United Bank for Africa are in strong position to withstand further devaluation of the Naira if the Naira were to exchange at N450 to the dollar. Fitch in a statement posted on its website said that other banks had mixed result in its stress text conducted on Nigeria banks based on their foreign currency portfolio.
In the statement it said “We found that the largest banks – Access, FBN Holdings, Guaranty Trust Bank, United Bank for Africa and Zenith – would be able to withstand this scenario without breaching their minimum capital adequacy ratio CAR requirements. However, second-tier banks had mixed results. Capitalisation is an important ratings differentiator for Nigerian banks, albeit within a narrow rating range. All the ratings are in the highly speculative ‘B’ range, constrained in most cases by Nigeria’s sovereign rating of ‘B+’/Negative and our assessment of the operating environment.
“We recently examined Nigerian banks’ foreign currency positions as part of a peer group review. We calculated banks’ capacity, based on end-September 2017 data, to withstand a hypothetical severe Naira depreciation to N450/$ without breaching their minimum regulatory total capital adequacy ratios (CARs). The Central Bank of Nigeria sets different minimum CARs for Nigerian banks: 16 per cent for those it considers to be systemically important, 15 per cent for those with international banking licences and 10 per cent for the rest.
“Our stress test also included increasing the risk-weight on foreign currency loans to 130 per cent (from 100%) to reflect extra difficulty for borrowers servicing foreign currency loans with a weaker Naira. It said that Nigerian banks’ move to a more market-based presentation of foreign-currency (FC) assets, liabilities and profit-and-loss items is likely to come into focus when they publish their 2017 results in the coming weeks, Fitch Ratings says. Financial statements with foreign currency items translated more in line with market exchange rates will give a more realistic representation of banks’ foreign currency positions and capital at risk from potential further depreciation of the Naira.
Fitch said that exchange-rate risk warrants scrutiny for Nigerian banks because about 40 per cent of assets and liabilities in Nigeria’s banking sector are denominated in US dollars and not all banks operate with matched foreign currency positions. It said “our discussions with banks that we rate suggest that most will publish their 2017 financial statements based on the Nigerian Foreign Exchange Fixing (NiFEX) rate, about N330/$ instead of the official exchange rate of N305/$, which they previously used. Some may use a blended rate. The NiFEX rate is the Central Bank of Nigeria’s reference rate for spot foreign-exchange transactions, widely used on the interbank market.
“Adopting the NiFEX rate is, however, only a partial step towards using market exchange rates. IFRS guidelines say that companies operating in countries with multiple exchange rates should translate their foreign currencies assets and liabilities into local currency based on the exchange rates at which they expect to settle them. But the guidelines leave scope for considerable judgement and flexibility, and Nigeria operates with multiple exchange rates, which adds to the confusion.
“In our view, the exchange rate used under the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) mechanism is the closest to a true market rate. NAFEX was introduced last year and rates are set by market participants, giving investors and exporters a more transparent way to sell FC. NAFEX attracts greater volumes than other exchange mechanisms. The NAFEX exchange rate is about N360/$. Switching to NiFEX or a blended rate would give a more meaningful representation of banks’ FC positions than using the official rate, in our view. But banks would still be translating FC into naira at a rate significantly below the NAFEX rate. We do not expect banks will go further at this stage as every increase in the exchange rate used could lead to a drop in reported regulatory capital ratios, due to inflation of FC risk-weighted assets, even though the impact would be partially offset by FC translation gains.
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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