The capital sector in Nigeria is currently at a critical juncture, under the spotlight following the call by the Securities and Exchange Commission (SEC) for market participants to review the fundraising strategies of local and state government agencies. This challenge was highlighted during the International Credit Rating Webinar organized by DataPro Limited.
It is undeniable that current financial guarantee measures, such as state government ISPOs, are no longer sufficient to ensure an acceptable level of risk in debt investments emanating from these agencies. It is therefore imperative that credit rating agencies adapt their assessment criteria to take into account the increasing risks and sustainability requirements of instruments issued by these entities.
Another challenge raised is the private bonds guaranteed by state governments, which do not offer proof of value in the secondary market. It is crucial to assess them according to their ability to deliver on stated project objectives. Webinar participants were therefore encouraged to explore the role of rating agencies in Nigeria’s sustainable economic development.
During the event, the keynote speaker highlighted the importance of banks supporting businesses in the real economy. He highlighted the role of rating agencies in deeply understanding the financial situation of companies, thereby providing reliable and essential information for banks and investors.
This convergence of opinions highlights the need to support local businesses to foster sustainable economic growth. Rating agencies play a key role in assessing credit risks and monitoring the evolution of these risks over time, a crucial aspect in ensuring the repayment of loans granted.
The discussion led by renowned experts highlighted the resilience of Nigerian entrepreneurs in the face of current economic challenges and stressed the importance of adapting quickly to new government policies. Despite a difficult context, investment opportunities remain in Nigeria and rating agencies must provide realistic outlooks for the benefit of investors.
The importance of developing strong financial markets was highlighted, indicating that well-established markets can help Africa, including Nigeria, withstand external shocks and reduce its dependence on foreign debt. The African Union’s attempt to establish an indigenous sovereign rating system was hailed as a positive step for the continent and its economies..
Finally, the panellists highlighted the challenges faced by rating agencies in assessing the ability of organizations to meet their debt obligations in the face of changing economic factors. These agencies must take into account several variables, such as the cost of borrowing and economic policies, to assign ratings that reflect economic reality.
This highlighting of the current challenges facing the capital sector in Nigeria underscores the need for a proactive and informed approach to ensure the viability of investments and foster sustainable economic growth.