OREANDA-NEWS. Fitch Ratings has affirmed Nigeria-based Bank of Industry Limited's (BOI) Long-term Issuer Default Rating (IDR) at 'BB-' with a Negative Outlook and its Short-term IDR at 'B'. Fitch has also affirmed BOI's National Long-term rating at 'AA+(nga)' and National Short-term rating at 'F1+(nga)'.

KEY RATING DRIVERS
IDRS, SUPPORT RATING, SUPPORT RATING FLOOR AND NATIONAL RATINGS
The state-owned development bank, BOI's ratings are driven by and equalised with Nigeria's sovereign ratings (BB-/Negative). They reflect Fitch's view that, if required, there is a moderate probability, that the Nigerian authorities would provide extraordinary support to the bank. The probability of support is reflected in BOI's Support Rating (SR) of '3'. The Negative Outlook on BOI's Long-term IDR reflects the Negative Outlook on Nigeria's sovereign rating.

BOI's Long-term IDR is at its Support Rating Floor (SRF) of 'BB-', which considers Nigeria's ability to provide such support in a timely manner as and when required, as indicated by Nigeria's Long-term foreign currency IDR of 'BB-'. We also believe that its propensity to provide such support is high, reflecting the state's 99.9% ownership, BOI's policy role and the bank's strategic importance to economic and industrial development. BOI's funding is long-term and almost exclusively sourced from the Central Bank of Nigeria (CBN).

The National Ratings reflect the bank's creditworthiness relative to the best credits in Nigeria.

BOI's was established by the state in 2001, and is 94.8% owned by the Ministry of Finance and 5.1% by CBN. Fitch considers BOI a policy bank, reflecting its key role in the state's structural and economic reforms, particularly in developing the non-oil sector. The bank is majority-funded by a NGN535bn zero coupon bond due 2025 issued to the CBN. Prior to that the bank was funded by a NGN100bn loan from the state (the Debt Management Office), which was converted to equity in favour of the Ministry of Finance. The bank is diversifying its funding but Fitch does not view this as any reduction in state support for the bank.

The bank provides concessional financing to SMEs and larger corporates in specific industries in the form of direct loans and on-lending to commercial banks. This includes lending to start-ups, existing businesses and the rehabilitation of ailing businesses and industries. The bank has 14 offices across the country. BOI also acts as a fund manager for state governments, the federal government and legacy funds of high net worth individuals. Some of the funds are intervention funds aimed at supporting specific industries. BOI receives a fee for managing and advising the funds. BOI does not have a special charter and is a limited liability company regulated by CBN as a development finance institution.

RATING SENSITIVITIES
IDRS SUPPORT RATING, SUPPORT RATING FLOOR AND NATIONAL RATINGS
BOI's IDRs, SR and SRF are sensitive to a weakening in the ability or willingness of Nigeria to support BOI, the former being reflected by a downgrade of Nigeria's sovereign rating. The ratings could also be downgraded in the event of material change in the government ownership and/or any change in the bank's policy role. An upgrade of the Nigerian sovereign would not necessarily lead to an upgrade of BOIs IDRs.

BOI's National Ratings are sensitive to a change in Fitch's opinion of BOI's creditworthiness relative to the best credits in Nigeria.

The rating actions are as follows:

Bank of Industry
Long-term IDR affirmed at 'BB-'; Outlook Negative
Short-term IDR affirmed at 'B'
National Long-term rating affirmed at 'AA+(nga)'
National short-term ratings affirmed at 'F1+(nga)'
Support Rating affirmed at '3'
Support Rating Floor affirmed at 'BB-'