31 March 2015, Abuja – Fitch Ratings has reaffirmed Nigeria’s long-term foreign and local currency credit rating at BB- and BB respectively, but however revised the country’s outlook from stable to negative.
It attributed the revision to what it described as political uncertainty in a tightly contested election and other issues that may arise after the polls, as well as low oil prices.
Citing drop in oil prices, Fitch also assigned a negative outlook to the BB- ratings of Angola last Friday and assigned negative outlook to Gabon and Malaysia’s ratings earlier. Fitch lowered the ratings of oil producers such as Russia and Venezuela.
The agency had on December 7, 2014 issued a BB-rating with a stable outlook for Nigeria.
But it has taken into account the earlier polls delay as well as security challenges in its latest rating. At the same time, Fitch acknowledged that the government has made gains on the security front, adding that the election has gone largely well except for technical glitches.
According to Fitch, the negative outlook could be returned to stable following a smooth electoral process and reduced political uncertainty among other factors.
The agency noted the government’s timely and rapid policy response in the face of falling oil prices, which includes revenue increases and cost cutting measures and strengthening tax administration.
Furthermore, it stated: “the Nigerian authorities have implemented a rapid policy response including exchange rate reform and significant fiscal consolidation, in response to lower oil prices.
“Distortions arising from a multiple currency practice have been eliminated through the closure of the auction windows,” the agency added. On debt, Fitch pointed out that Nigeria’s public and external debt ratios remain stable and low when compared to its peers.
“Debt is well managed. There is a diverse local investor base and local debt is expected to remain in key global bond indices. Debt service ratios are also low.”
Fitch sounded a note of caution saying that economic performance is likely to weaken partly due to the erosion of fiscal and external buffers and a high dependence on oil for revenue.
It however said that non-oil growth will remain robust while reforms in power and agricultural sectors will help to keep the momentum. It put non-oil growth forecast at 5.5 percent for 2015 from 7.4 percent in 2014 and an average of 5.6 percent over the past five years.
Nigeria is currently rated Ba3 (equivalent to BB-) with stable outlook by Moodys and B+ with stable outlook by Standard & Poor’s.
*Ndubuisi Francis – Thisday