By Okafor Joseph Afam, Publisher – SpringNewsNG | June 23, 2025Ecobank Nigeria has suffered a major credit setback as S&P Global Ratings downgraded its long-term issuer credit rating to ‘CCC-’ from ‘CCC’, with the outlook revised to negative. The downgrade follows the bank’s recent $150 million bond buyback offer on its $300 million Senior Unsecured Eurobond, raising serious concerns over its capital adequacy and future liquidity position.

As part of the bond repurchase offer, Ecobank Nigeria included an early tender premium of $12.50 per $1,000 of principal (representing 1.25%), with settlement expected on July 8, 2025. In the same proposal, the bank requested bondholder consent to remove the capital adequacy covenant on the outstanding Eurobond notes.

This move prompted S&P to also downgrade the $300 million Eurobond from ‘CCC’ to ‘CCC-’. While S&P clarified that the offer does not currently qualify as a distressed debt restructuring, it warned that this status could change if the promised capital infusion from the parent company—Ecobank Transnational Incorporated (ETI)—fails to materialize.

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Ecobank’s Capital Adequacy Challenges

Following Nigeria’s naira devaluation, Ecobank Nigeria’s Capital Adequacy Ratio (CAR) dropped to 7%, falling below the regulatory minimum of 10%. This shortfall forced the bank to seek bondholders’ approval to pause enforcement of CAR-related covenants until September 2025.

To address the issue, ETI made a $50 million prepayment on promissory notes and helped repay some foreign currency loans early. However, these efforts were insufficient to bring the CAR back to compliance.

S&P noted that the bank is projected to receive an additional $50 million capital injection before August 2025, but warned that failure to secure this funding could trigger a default on its bonds, potentially resulting in a further downgrade to ‘CC’.

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Urgent Recommendations for Financial Stability

In response to the situation, analysts recommend that Ecobank Nigeria urgently raise at least $150 million through Tier-1 capital instruments to stabilize its liquidity buffer. Additionally, the bank is being urged to aggressively pursue recovery of its foreign currency-denominated loans to improve its balance sheet.

The credit downgrade reflects mounting pressure on the bank’s financial health and sends a strong signal to investors and regulators about the urgency of shoring up capital and rebuilding investor confidence.

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What This Means for the Nigerian Banking Sector

Ecobank Nigeria’s downgrade adds to a growing list of challenges facing Nigerian banks amid rising inflation, forex volatility, and capital flight. The fragility of capital buffers, especially under global market scrutiny, signals the need for Nigerian banks to diversify funding sources, strengthen risk management, and enhance foreign currency liquidity.

Investors and bondholders will be closely watching the next few months, especially the anticipated capital injection by August 2025, as a determining factor in whether Ecobank Nigeria avoids further rating downgrades or enters default territory.