5 days ago
Nigerian banks face uncertainty over looming Eurobond maturities: IFR
A cliff-edge fall is approaching for bonds maturing in the next 18 months issued by Nigeria's banks, which have been heavily affected by a rapid depreciation of the naira and a subsequent weakening of their capital ratios.
Banks' balance sheets have been materially affected, raising concerns over how and whether they can repay and refinance their upcoming bonds.
From October 2025 through to November 2026, five Nigerian banks face a combined US$2.2bn in Eurobond payments for maturing or callable bonds.
The securities in question are First Bank of Nigeria's US$350m 8.625% October 2025s, Ecobank's US$150m 7.125% February 2026s, Access Bank's US$500m 6.125% September 2026s, Access Bank's US$500m 9.125% Additional Tier 1 note callable in October 2026, Fidelity Bank's US$400m 7.625% October 2026s and United Bank of Africa's US$300m 6.75% November 2026s.
According to LSEG data, since June 2023, the naira has depreciated around 70% against the US dollar, due to the country's reforms which included a liberalisation of the currency. 'The devaluation of the currency inflated foreign currency assets and risk-weighted assets in local currency terms, which put downward pressures on capital ratios,' said Tim Slater, director, banks, at Fitch Ratings.
The macroeconomic backdrop has not helped the country's lenders either, with the Central Bank of Nigeria having tightened monetary conditions significantly through rate hikes and tools such as open market operations. Meanwhile, inflation is set to remain stubbornly high and falling oil prices have not been helpful either.
'The banking sector's exposure to the oil sector is significant at around 29% of gross loans as of December last year,' said Slater. 'This oil exposure has historically been a source of bad asset quality and solvency pressures during episodes of low oil prices and low oil production.'
All of these issues have raised some concerns about how easily Nigeria's banks will meet their upcoming Eurobond payments, although these worries have become less acute over the past few months.
'Since the second half of last year, the currency has stabilised and we are starting to see the benefits of the currency liberalisation coming through for the banking sector, particularly in terms of foreign currency liquidity,' said Slater. 'This is timely considering the upcoming Eurobond maturities.'
'Over the past 12 months, the foreign-currency liquidity of Nigerian banks has improved significantly, with the banking sector returning to a net foreign asset position,' he added.
Ecobank Nigeria's CAR woes
Of the five Nigerian banks with upcoming maturities, the biggest concern lies with Ecobank Nigeria, which has been in breach of its capital adequacy ratio since last year. The breach of its CAR requirement led S&P and Fitch to downgrade Ecobank Nigeria to CCC from B– and CCC+, respectively, deep into junk status.
Ecobank Nigeria is more sensitive to the devaluation of the naira against the US dollar due to its balance sheet being more dollarised. The bank also has a significantly higher exposure to oil and gas compared to other banks in Nigeria.
The bank recently completed a tender offer to buy back half of its previously outstanding US$300m 7.125% February 2026 bond while removing a covenant on the bond relating to the bank's CAR. This has mitigated concerns for the bank meeting its maturity payment.
'Ecobank Nigeria was the one that made me worried when it came to refinancing,' said Damilola Olupona, an Africa fixed income analyst at StoneX, based in Nigeria. ' We thought it could even default on its 2026 bond. Outside of this, we have no worries. On the macro front, the landscape has improved significantly in terms of FX liquidity in Nigeria. This improved liquidity feeds into the banks making them able to meet their debt obligations.'
Union Bank of Nigeria is also in breach of its 10% minimum CAR requirement. However, the bank does not have any outstanding Eurobonds.
To refi or not?
While concerns have eased on Nigerian banks in meeting their upcoming maturities, the attention has turned to whether they will be able to access the market to refinance these bonds.
'The big question is how many of the bank will come back to the market,' said Olupona.
Slater said: 'The vast majority of Nigerian banks have enough cash on their balance sheets to repay those bonds without relying on refinancing them'.
Nevertheless, he said banks might still look to refinance depending on market conditions closer to the time of maturity.
One of the banks most likely to refinance is Access Bank, which has the senior US$500m September 2026s and US$500m of AT1 callable October 2026. Given the combined US$1bn due in such a short space of time, the bank might look to lean on refinancing one of these bonds to reduce the impact on its balance sheet, according to market participants. The rest of the banks will likely adopt a wait and see approach to see if levels for refinancing reach sustainable levels.
'At today's rates, the banks would have to refinance at around 9.25%–9.5% but Nigeria's sovereign yield curve is contracting at the five-year point so these banks could potentially price much lower in the near future,' said Samuel Sule, chief executive officer at Renaissance Capital Africa, based in Nigeria.
Having a number of banks reenter the market over a similar timeframe might be difficult. 'There has to be synchronised market access to enable a clear, sustainable path for refinancing,' said Sule. 'This has been the case historically'.
