Rating Agencies’ Positive Outlook on Nigeria’s Economy



Fitch and Moody’s ratings for Nigeria remain at BB- with stable outlook, as Standard and Poor’s downgrades rating by one notch because of oil price fall

WHILE the last assessment of Nigeria by two international rating agencies, Moody’s and Fitch remains unchanged, a third agency – Standard & Poor’s – has downgraded the country’s rating by a notch mainly because of the fall in international crude oil prices.

Fitch Ratings had published a rating of BB- with a stable outlook for Nigeria on December 7, 2014.

Similarly, on March 10, Moody’s Investors Service also published a positive Ba3 rating (same as BB-) for Nigeria.

But Standard & Poor’s, which released its latest assessment of Nigeria’s credit rating on Friday March 20, downgraded the country’s rating from BB- to B+ on the grounds that “the decline in oil prices in the last seven months has significantly affected Nigeria’s external position and external vulnerability.”

The agency described the federal government’s fiscal programme in response to the crisis in the global oil market positively as “proactive and ambitious”. Standard & Poor, S&P, however identified the coming general elections and the “potential underperformance on oil production” as possible negative factors.

Nigeria is one of many oil producing countries downgraded by S&P due to the impact of the steep drop in global oil prices on their economies. In fact, the rating agency has downgraded virtually all oil dependent economies including Russia, Bahrain, Congo (Brazzaville), Kazakhstan, Oman, Venezuela, Angola and Gabon. S&P also assigned a negative outlook to Azerbaijan and Saudi Arabia.

S&P said it also based its decision on Nigeria on “significant” political risk arising from the coming elections as well as the impact of insurgency in the North East.

On the positive side, S&P puts annual real GDP growth at 5 percent “in spite of the troubles in the northeast and the fall in oil prices”. This is slightly higher than the 4.8 percent projected by the International Monetary Fund, IMF and is quite robust by current global standards.

Even more significant, S&P also noted that GDP growth is being driven by the non-oil sectors of the economy. This confirms recent statements by the Ngozi Okonjo-Iweala, coordinating minister for the economy and minister of finance, that the country is entering a post-oil phase in its economic development. The rise in tax collection by the Federal Inland Revenue Service last year by N110 billion over and above the normal target is one example of this.

S&P also commended “A series of reforms, including in agriculture, and the rapid growth of sectors such as telecoms and financial services, have contributed to non-oil growth momentum.”

The agency also stated that the continued 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.”

—  Mar. 30, 2015 @ 01:00 GMT


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