A credit rating agency, DataPro has trained media professionals with the adequate know-how to interpret and report rating outcomes as well as promote the value proposition of the credit rating industry.

At the training held virtually, recently, DataPro’s Chief Rating Officer and facilitator of the event, Oladele Adeoye, who spoke on ‘Understanding Qualitative Factors in Rating Considerations’, said the programme, already in its third edition, was to educate the media on qualitative factors to be considered in rating decisions, promote the value proposition of the credit rating industry, and instill a credit culture in Nigeria.

He also said the aim was to expose the public to some unpopular and seemingly insignificant areas of credit rating and to equip the media with the adequate know-how to interpret and report rating outcomes, among others.

Giving a global economic outlook, emphasising Nigeria’s growth rate vis-à-vis inflation rates, he said as of Sept 2024, the Nigerian government relies more on domestic borrowing, as it accounted for 51.6 percent of the total debt profile, with the Federal Government taking ₦69.2 trillion and state governments having ₦4.2 trillion as their debts.

According to him, the increase was due to the issuance of Federal Government bonds and a rise in promissory notes, showing the government’s dependence on domestic borrowings to meet financial needs.

He stated that the bond issuance in naira contributed to most of the spike, as the dollar-based bond was recently introduced to the domestic stock at ₦1.47 trillion.

Adeoye gave the concept of credit rating agencies, which emerged in the United States in the 1840s, citing the first credit rating agency, the Mercantile Agency, founded in 1841 by Lewis Tappan, where the agency collected and sold information about the creditworthiness of businesses.

He defined credit rating as an opinion on the creditworthiness of an issuer, such as a corporation or government, based on the ability to meet their financial obligations.

According to him, credit ratings are used by investors who want to know the risk of buying bonds or other debt instruments issued by the entities.

Analysing the concept of credit rating, the DataPro chief explained the three main expectations of a credit rating agency, citing stable, timely and accurate predictions.

According to him, stable prediction maintains consistency in predictions to build trust and reliability.

Adeoye said timely predictions ensure predictions are made promptly to allow for necessary actions, while accurate predictions develop models that precisely identify potential defaults.

Noting that credit rating agencies play a significant role in promoting economic growth, employment, and efficient credit allocation, he listed some ways that the agencies achieve this.

He said these are achieved by facilitating access to capital, reducing funding costs, encouraging investment, supporting infrastructure development, and promoting economic growth.

On value proposition, Adeoye said credit rating outcomes are determined through a comprehensive evaluation process by its agencies.

He stressed factors that influence credit rating outcomes, such as qualitative factors like financial performance, debt profile, liquidity, and profitability.

Also, he mentioned factors such as management and governance, industry and market, regulatory environment, business reputation, and economic conditions.

While he gave the qualitative factors in assessing credit risk, Adeoye said it was also equally important to consider the qualitative factors that provide a deeper understanding of the borrower’s creditworthiness.

On economic and political factors, he hinged them on economic conditions, political risk, and environmental factors.

On the role of the media, he said the media has the unique advantage of assessing qualitative data and could, therefore, assist the larger credit economy through objective reporting.

According to him, the media needs to be objective; conduct market research, independence, surveillance, and business analysis; and expose and advance the course of investigative journalism in Nigeria.

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