Fitch Ratings indicated that Central Bank of Nigeria's (CBN) decision to address the problems at the failed Skye Bank does not imply that Nigerian banks can always rely on state support, considering the sovereign's credit weakness. It noted that Skye Bank's liquidity was weak, that the bank required permanent liquidity support from the CBN, and that its shareholders failed to provide additional capital. Accordingly, the CBN announced that it had revoked Skye Bank's license, and that the bank's assets and liabilities, as well as most of its employees' contracts, were transferred to Polaris Bank, the new bridge bank that was created for this purpose. However, it indicated that the authorities were slow to solve Skye Bank's difficulties and that the bank's problems, partly arising from weak governance, were not recent. It pointed out that the Asset Management Corporation of Nigeria, a state-owned entity established to acquire and eventually sell underperforming banks and selected bank assets, would initially provide NGN786bn, or $2.6bn, to recapitalize Polaris Bank. It added that the Nigeria Deposit Insurance Corporation would operate Polaris Bank and guarantee all of its deposits, which would help preserve depositor confidence and improve the credit profile of the Nigerian banking sector. Fitch assigned a 'No Floor' rating for Nigerian banks on their support rating floors, which means that the banks' ratings do not incorporate any sovereign support and that authorities did not officially convey their willingness to support the banking sector. 
Source: Fitch Ratings

S&P Global Ratings assessed the resilience to external shocks of 22 emerging market (EM) sovereigns with high levels of government debt, such as a sudden loss of foreign financing due to tightening global liquidity. It noted that rising U.S. interest rates and the recent global trade tensions have raised concerns about potential liquidity challenges spreading across EMs. However, it indicated that EM sovereigns have become more resilient to external risks, and did not expect a high risk of contagion from the recent market turmoil. It considered that EM sovereigns that have fiscal and financial buffers, and that have developed a credible and predictable institutional stance, have the capacity to mitigate adverse shocks. In contrast, it considered that sovereigns that lack such credit qualities and that did not undertake adequate reforms would have to make hard policy adjustments to avoid a crisis or a default in the event of a sudden loss of foreign financing. 

In addition, S&P projected that 14 out of the 22 EM sovereigns will run a current account deficit in 2018. But it considered that most EM sovereigns have other credit strengths that provide them with financial and policy flexibility to manage external challenges. It said that countries with a net external debt position and a current account deficit, such as Argentina, Egypt and Turkey, are more vulnerable to adverse external developments; while EM economies with favorable external positions, such as China, Russia and Saudi Arabia, are more insulated against external shocks. Further, it noted that all EM sovereigns with a current account deficit in 2018 have either a floating or a free-floating exchange rate, which would help them absorb external shocks. However, it indicated that any sharp movement in the exchange rate could have significant negative repercussions, especially in economies with a weak or ineffective monetary policy, small domestic capital markets, and high reliance on external debt.
Source: S&P Global Ratings

Figures compiled by Citi Research show that emerging markets (EMs) issued $394bn in external sovereign and corporate bonds in the first nine months of 2018, down by 16.5% from $472bn in the same period of 2017. Gross debt issuance in Asia excluding Japan reached $193bn or 49% of the total, followed by the Middle East & Africa (ME&A) with $95bn (24.1%), Latin America with $61bn (15.5%) and Emerging Europe with $46bn (11.7%). Further, EM corporates issued $275bn in bonds in the first nine months of the year, equivalent to 69.8% of total sovereign and corporate bond issuance. Asia ex-Japan issued $182bn, or 66.2% of total corporate issuance, followed by the ME&A region with $37bn (13.5%), Latin America with $34bn (12.4%) and Emerging Europe with $23bn (8.4%). Also, EM sovereigns issued $119bn in bonds, or 30.2% of new sovereign and corporate bonds in the covered period. The ME&A region issued $58bn, or 48.7% of total new sovereign bonds, followed by Latin America with $27bn (22.7%), Emerging Europe with $23bn (19.3%) and Asia ex-Japan with $11bn (9.2%). Further, Citi Research projected upcoming EM's sovereign external debt service payments at $23.6bn in the fourth quarter of 2018, of which $10.6bn, or 44.9% of the total, is from Latin America, $5.9bn (25%) from the ME&A region, $5bn (21.2%) from Emerging Europe and $2.1bn (8.9%) from Asia ex-Japan. It also expected upcoming EM corporate external debt service payments at $30.8bn in the fourth quarter of 2018, of which $13.5bn, or 43.8% of the total, is from Asia ex-Japan, $6.4bn (20.8%) from Emerging Europe, $6.1bn (19.8%) from Latin America and $4.8bn (15.6%) from the ME&A region.
Source: Citi Research, Byblos Research