THE Chief Rating Officer/Executive Director of DataPro Limited, Oladele Adeoye, has attributed choice of a borrower and popularity of a credit rating agency as determinants for the Nigerian federal government in using international rating agencies.
Adeoye gave this expert view on Thursday, March 30, at a media training to keep journalists abreast of the knowledge and tools needed to accurately report issues relating to the credit rating industry.
Themed, ‘Training Program on Media Coverage of Credit Rating Outcomes’, the event was also designed to foster and encourage a mutually beneficial partnership between the media and the rating industry.
“Ultimately, what the borrower is looking for is money, and it wants to use rating agency that is known in the environment where the money is coming from. The choice of where money is expected from also determines sometimes what rating agencies to use,” Adeoye said.
He said that state governments, however, made use of the services of local credit rating agencies, except for one or two states.
“Other states in Nigeria have been using domestic rating agencies and they are using them very well. DataPro has been one ot those rating agencies that provide rating to Nigeria,” Adeoye said.
A rating agency is a company that assesses the financial strength of companies and government entities, especially their ability to meet principal and interest payments on their debts.
Nigeria has three credit rating agencies that have been approved by the Securities and Exchange Commission (SEC).
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There is Agusto & Co Limited, a credit rating agency providing services in credit risk management, policy and process review, customised research, rating validation and portfolio analysis, besides other functions.
Datapro Limited offers services in credit rating, debt recovery, and business information services.
Global Credit Ratings Limited, a subsidiary of Duff and Phelps, provides ratings, subscriptions, and support services in Africa.
The global credit rating industry is dominated by three big agencies, which control 95 per cent of the rating business. The firms are Moody’s Investor Services, Standard and Poor’s (S&P), and Fitch Group, The ICIR can report.
Moody’s and S&P, located in the United States, both dominate 80 per cent of the international market, while Fitch, located in the U.S. and London, controls approximately 15 per cent of the global market.
The rating assigned to a given debt shows an agency’s level of confidence that the borrower will honour its debt obligations as agreed.
In the course of the training, Adeoye highlighted that credit rating helps to build market confidence, grow the capital market, encourage investor participation in development projects, and provide simplified adequate information to investors, among others.