The downgrade of the nine lenders also affected their issuer ratings and the senior unsecured debt ratings.
Nigeria's Minister of Finance, Zainab Ahmed, on Thursday disagreed with ratings agency Moody's downgrade of Nigeria's sovereign rating to Caa1 from B3.
The minister, who expressed 'surprise' at the development, noted that the government has started taking actions to resolve issues raised by Moody's.
"Moody's downgrade came as a surprise to us because we had presented all the work that we have been doing to stabilise the economy," Mrs Ahmed said in Abuja.
"But these are external rating agencies that don't have the full understanding of what is happening in our domestic environment."
The minister also expressed optimism about S&P's rating of Nigeria, which will be issued on Friday.
"S&P's assessment is not the same as Moody's. They have come out with a much better assessment," Mrs Ahmed said.
Moody's in its recent ratings said it has a stable outlook on the country, according to a statement issued on Friday. But the latest rating also reflects the Nigerian government's long-term foreign-currency and local-currency issuer ratings as well as its foreign currency senior unsecured debt ratings. The firm equally cut the country's foreign currency senior unsecured MTN programme rating to (P)Caa1 from (P)B3.
Obligations that are rated Caa are considered to be of poor standing and are subject to very high credit risk.
The latest sovereign rating echoes the one by Fitch in November, which similarly lowered Nigeria's rating by one level at B-, placing it six notches above default and on par with Angola and Ecuador.
Banks' Downgrade
Meanwhile, Moody's Investors Service on Wednesday lowered the long-term deposit ratings of nine Nigerian banks to Caa1 from B3 days after a similar action by the global credit agency downgraded Nigeria sovereign rating deeper into the junk territory.
The downgrade of the nine lenders also affected their issuer ratings and the senior unsecured debt ratings, both of them reverberations of lowering Nigeria's sovereign credit ratings into non-investment grade.
Nigeria's government Eurobonds had been dumped at the fastest rate in three months by investors following the downgrade, pushing the country's credit spreads close to the distressed territory.
The lenders affected by the latest downgrade include Access Bank, Guaranty Trust Bank, Sterling Bank, Fidelity Bank, First Bank of Nigeria Limited, Zenith Bank, First City Monument Bank, Union Bank and United Bank for Africa.
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Moody's said its stance on the banks' ratings is an affirmation of the weakening operating environment manifest in the lowering of the macro profile of Nigeria to "very weak" from "very weak+".
It added that the development is a reflection of the nexus between Nigeria's fragile creditworthiness and the lenders' balance sheets, considering the banks huge exposure to sovereign debt instruments.
"Rated Nigerian banks have significant direct and indirect exposure to the Nigerian sovereign, with a significant portion of their assets located in the country, and sovereign debt holdings representing 28 per cent of their aggregate total assets as of June 2022." Moody's said.
"Government exposure links the banks' credit profiles with the sovereign's, whose rating was downgraded on 27 January 27, 2023, to reflect Moody's expectation that the government's fiscal and debt position will continue to deteriorate," it added.
Last October, the ratings agency downgraded Nigeria's local currency and foreign currency long-term issuer ratings as well as its foreign currency senior unsecured debt ratings to B3 from B2 and placed them on review for downgrade.
