A Review of the Nigerian Energy Industry

Standard & Poors gives Nigeria B+ rating

*Standard & Poors.
*Standard & Poors.

19 September 2015, Sweetcrude, Lagos – Standard & Poor’s credit rating for Nigeria stands at B+. Moody’s rating for Nigeria sovereign debt is Ba3.

Fitch’s credit rating for Nigeria is BB-. In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of Nigeria thus having a big impact on the country’s borrowing costs.

The Trading Economics (TE) credit rating is driven by a model created at Trading Economics. We take into account the average grade given by credit rating agencies plus multiple economic indicators, exchange rates, government bond yields, stock indexes, commodity prices and very little discretion.

Unlike the ratings provided by the major credit agencies, our index is numerical because we believe it is easier to understand and visualize on historical data charts and more insightful when comparing multiple countries.

S&P noted that President Muhammadu Buhari recently ordered all government revenues to be transferred to a single account held at the central bank, which it stressed would help curb corruption.

“At the same time, we affirmed our long-term national scale rating on Nigeria at ‘ngA’ and we affirmed the short-term national scale rating at ‘ngA-1’,” S&P said.

S&P warned that it could lower the rating if Nigeria’s external and fiscal positions deteriorate beyond “our current expectations, or if Nigeria’s policymaking and institutional stability weaken”.

S&P stated that it could consider an upgrade if external factors improve considerably (for example, due to a sharp or prolonged rebound in the oil price), or if Nigeria’s external and fiscal balances perform well above its expectations.

“The low oil price environment continues to impact Nigeria’s external and fiscal balances. The poor financial position of many states prompted the federal government and Central Bank of Nigeria to offer them financial support packages.
“We are affirming our long-term sovereign credit ratings on Nigeria at ‘B+’.

“The stable outlook reflects our view that Nigeria’s non-oil economy will continue to support GDP growth and that external and fiscal balances will not increase significantly above our current expectations,” S&P said.

The Agency also noted that its ratings on Nigeria were constrained by its view of the country’s low GDP per capita; low level of development outside the oil sector; significant infrastructure shortcomings; internal political tensions; and weak, albeit strengthening, institutions.

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