The recent default by Geregu Power Plc on its ₦40.09 billion Series 1 senior unsecured bond under its ₦100 billion bond programme represents a significant event for Nigeria’s corporate debt market.
The event places renewed focus on the role of credit risk analysis in Nigeria’s debt capital markets and the factors that underpin robust, forward-looking credit assessments. Intelligence Africa Ratings (IA) does not currently rate Geregu Power.
However, we assess other entities and instruments exposed to Nigeria’s power sector and incorporate the sector’s systemic risks into our credit assessments through our Industry Profile Adjustment.
The development provides an opportunity to consider several important aspects of credit analysis, including the distinction between systemic and issuer-specific risk, the importance of forward-looking assessment, and the role of credit enhancement in debt instruments.
Systemic versus issuer-specific risk
