At the recent 2024 International Credit Rating Webinar hosted by DataPro Limited, experts emphasized the critical need for credit rating agencies (CRAs) to deliver clear and realistic assessments to guide investment decisions amidst ongoing economic instability. The panel, moderated by Prince Oladele Adeoye, Chief Rating Officer of DataPro Limited, featured prominent figures from the financial sector, including Mr. Sam Amukoko, Managing Director of Kenya’s Metropol Rating Agency, Dr. Sonnie Ayere, Group Managing Director of DLM Capital Group, and Mrs. Kemi Awodein, Managing Director of Chapel Hill Denham. The discussions underscored the necessity for enhanced clarity in ratings to bolster investor confidence, with a consensus that despite Nigeria’s tumultuous economic landscape, substantial investment opportunities still exist.
The panellists highlighted the pivotal role of robust capital markets in helping African economies navigate external economic shocks while reducing reliance on foreign debt. They praised recent initiatives by the African Union aimed at establishing homegrown Sovereign Ratings, viewing it as a progressive step for both the continent and its individual economies. This move is anticipated to refine how local debt instruments are rated, ultimately leading to a more favorable investment climate and better economic resilience. With a well-structured capital market, Nigeria and similar economies could significantly improve their financial independence and attract more sustainable investments.
During discussions on the interplay between macroeconomic conditions and credit ratings, experts pointed out the complexities that CRAs face in assessing the capacity of entities to meet their debt obligations amidst fluctuating economic variables. They acknowledged that factors such as borrowing costs, economic policies, and global economic trends are essential in determining default risks. Consequently, to reflect the evolving economic realities accurately, CRAs must adopt a multi-faceted approach in their ratings assessments. Notably, even in challenging environments, opportunities exist for savvy investors who can navigate and identify them.
Specific opportunities in Nigeria were highlighted, including its significant infrastructure deficit, burgeoning population growth, and potential within various underdeveloped sectors. These factors present a unique landscape where investors can seek favorable returns, particularly in the Commercial Paper sector, which was noted for its significant prospects despite the prevailing economic difficulties. The panelists emphasized that these opportunities reflect Nigeria’s attractiveness as an investment destination, positioning it favorably for discerning investors willing to engage with the market.
In his welcome address, DataPro founder Abimbola Adeseyoju reiterated the webinar’s role as a platform to promote the value and function of credit rating institutions across Nigeria and Africa. He outlined the dual function of CRAs: providing credible assessments of asset qualities while complementing risk management strategies for investors and market participants. Adeseyoju advocated for CRAs to serve a collective aim of stimulating economic growth, empowering the real sector, and fostering a wealthier, sustainable society through enhanced credit ratings and investment insights.
The keynote address by international banking entrepreneur Christian Ruehmer further reinforced the role of banks and credit rating agencies in supporting the real economy. He articulated the shared mission of these institutions in fostering business success and promoting robust financial practices. Ruehmer stressed that for developing countries like Nigeria to thrive, it is crucial to establish effective financing mechanisms for domestic businesses. Here, CRAs play a vital role in building investor confidence and facilitating the assessment of local companies, enabling banks and other financial stakeholders to engage more effectively with the Nigerian market. This collaboration can drive the necessary investment influx to propel the economy forward amidst the challenges faced.
