Ecobank Nigeria is going through a mounting monetary disaster, exacerbated by the Central Financial institution of Nigeria (CBN)’s resolution to finish the moratorium on forbearance exposures for Nigerian banks.
In keeping with a company disclosure launched on July 9, the group, Ecobank Transnational Integrated (ETI), is seeking to elevate $250 million in extra tier-1 devices in 10 days. The group famous that the elevate will come within the type of personal placements.
The urgency to boost capital is pushed by mounting liquidity pressures. These pressures are largely a results of Ecobank Nigeria’s deteriorating credit score danger profile and the rising menace of default.
In keeping with the group’s 2024 annual report, roughly 76.6 per cent of Ecobank Nigeria’s gross mortgage portfolio falls beneath Stage 2 and Stage 3, which, beneath IFRS 9, require full lifetime anticipated credit score loss provisions. This misery is basically pushed by the Nigerian financial institution’s overexposure to the oil and fuel sector, a historically unstable section of the Nigerian financial system.
Learn Additionally: Ecobank Transnational raises $250m additional tier 1 capital via private placement – Businessday NG
On June 30, the CBN formally lifted the moratorium on regulatory forbearance and reinstated the only obligor restrict. This regulatory shift comes at a very difficult second for Ecobank Nigeria, which is already grappling with extreme credit score stress and a breach of its minimal capital adequacy ratio (CAR). Consequently, S&P World downgraded the financial institution to CCC-, citing its deteriorating monetary situation. The financial institution’s CAR at the moment stands at roughly 7 per cent, properly under the regulatory minimal of 10 per cent. In response to this breach, the financial institution, with bondholder approval, eliminated the CAR covenant from the phrases of its $300 million bond notes.
Moody’s and S&P flag capital danger
The disaster at Ecobank Nigeria has forged a protracted shadow over its guardian firm, Ecobank Transnational Integrated (ETI). In March 2025, Moody’s downgraded ETI to B3 with a detrimental outlook, highlighting that the recapitalisation burden of Ecobank Nigeria is straining the group’s credit score profile.
In keeping with Moody’s, “the required capital injection from ETI into Ecobank Nigeria is predicted to considerably weigh on ETI’s liquidity and double leverage ratio.”
The double leverage ratio is a key monetary measure that evaluates how a lot of a holding firm’s funding in subsidiaries is funded by debt as a substitute of fairness. In easy phrases, it alerts how a lot danger the guardian is taking to fund its operations by borrowed cash.
With a double leverage of 174 per cent as of end-2023, ETI finds itself in a precarious liquidity place, very similar to its Nigerian subsidiary. Analysts recommend this monetary pressure is contributing to Nedbank’s resolution to exit its 21.22 per cent stake in ETI, Nedbank being the group’s largest strategic shareholder.
S&P went additional by assigning a detrimental outlook to Ecobank Nigeria alongside the CCC-rating, stating {that a} default seems inevitable until the financial institution can elevate a minimum of $150 million in Further Tier-1 capital inside six months. The ranking company expressed scepticism, warning that “the unsure financial setting might make it harder to spice up capital by such means.”
Ecobank’s asset high quality points
Though the financial institution’s minimal paid-up share capital has exceeded the regulatory minimal of N200 billion, its asset high quality stays questionable. Outdoors of the CAR necessities, the financial institution’s equity-to-asset ratio is at 6.8 per cent. Though this may be described as typical for a financial institution, nonetheless, it severely lags GTCO’s 18.4 per cent, Zenith’s 13.4 per cent, and UBA’s 11.3 per cent.
Much more unsettling is the standard of the financial institution’s exposures. On the finish of FY 2024, the financial institution had a NPL protection ratio of 38.2 per cent, with a fair decrease Stage 3 protection ratio of 18.9 per cent. In less complicated phrases, the financial institution had solely put aside sufficient provisions to cowl 38.2 per cent of its non-performing loans, and simply 18.9 per cent of its most significant issue loans (Stage 3).
In all of this, the financial institution has outlined capital restoration plans, together with a transfer to difficulty a $200 million Further Tier-1 Bond in 4 tranches of US$50 million every. The financial institution can also be seeking to cut back its $300 million in risk-weighted belongings by mortgage gross sales to eligible third events. Then it additionally introduced plans to transform as much as $200 million in dollar-denominated loans to Naira.
Nevertheless, analysts and market observers are pessimistic. An observer who craved anonymity famous,
“Who’s going to purchase $200 million AT-1 devices when the mortgage guide is 75 % in default? Additionally, early redemption of promissory notes would successfully transfer ETI nearer to chapter, too, as you see in their very own scores experiences, they’ve liquidity issues.”
