Moody’s Investors Service has changed the ECOWAS (Economic
Community of West African States) Bank for Investment and Development (EBID) outlook to stable from negative and affirmed the B2 long-term issuer rating.
The rating followed EBID’s recent clearance of arrears on capital from a number of major shareholders, continuing efforts to improve its liquidity framework and risk management practices, and
an expansion in funding sources which helped reduce EBID’s dependence on a narrow range of trade finance providers.
The stable outlook also reflects the recent orientation of EBID’s business model towards increased on-lending activities. Moody’s also assumes that EBID will significantly slow its loan book expansion plans given limited near-term prospects for raising further significant capital to contain rising leverage.
The B2 rating affirmation balances these modest improvements in a number of key credit characteristics against persistent credit challenges, including a still-weak liquidity profile from concentrated albeit gradually improving financing sources, limited historical support from lowly rated shareholders notwithstanding recent repayments of capital arrears, weak capital adequacy given the bank’s low borrower quality and challenging area of operations, and governance constraints.
During the first nine months of 2021, the bank received $61 million in capital subscription payment arrears from a number of shareholders, with EBID’s arrears as a percentage of called capital declining to 14% from 23% in 2020. This provided capital to support approximately $202 million (26%) expansion year-to-date in the loan book, as EBID embarked on the first year of the new 2021-25 strategic plan which aspires to a significant expansion in the loan book. Nigeria and Côte d’Ivoire almost fully paid their arrears with $29 million and $21 million payments, respectively in 2021.