Fitch Ratings has affirmed Nigeria's long-term foreign and local currency issuer default ratings (IDRs) and senior unsecured bond ratings at BB- and BB, respectively. The global rating agency has also affirmed the West African country’s short-term foreign currency IDR at B and country ceiling at BB-. The outlook is stable.
Fitch said that Nigeria's ratings are supported by a resilient GDP growth, reforms to the electricity and agriculture sectors, which could boost growth, stable inflation, which has remained in single digits during 2013 - the longest stretch of single digit inflation since 2008, the central bank’s continuous policy to achieve single-digit inflation and maintain exchange rate stability, and stable public finances with an estimated general government deficit of around 1.8% of GDP in 2013 and 2014. The agency noted that although slowing to 6.4% in H1 2013, GDP growth remained resilient to severe floods in 2012 which hit agricultural output, security problems in the north in the beginning of 2013, and increased oil theft and vandalism and the consequent repair shutdowns which have led to reduction in oil output for the second year in a row. It expects the growth of the non-oil economy to pick-up in H2 2013 from 7.6% in H1 as normal weather has resumed and the authorities have responded to security problems. Fitch anticipates Nigeria’s general government debt to remain stable at just over 20% of GDP, barely half that of peers.
Nigeria's ratings remain constrained by weak governance, low per capita income and vulnerability to oil price volatility, while data weaknesses hamper the monitoring of economic and fiscal performance and reform progress.
Fitch said that it may upgrade Nigeria’s rating if structural reforms continue and lead to faster, more diverse and inclusive growth and higher employment and per capita incomes, if inflation remains in single digits for a prolonged period, if external buffers improve, either in the Excess Crude Account (ECA) or the new Sovereign Wealth Fund (NSIA), and if governance improves as reflected in World Bank and anti-corruption indicators. On the other hand, the ratings could be lowered in case of a sustained period of lower oil prices or oil production and an inappropriate policy response, leading to serious reserve loss and deterioration in the fiscal position, or if key structural reforms are reversed, as well as in case of a serious deterioration in domestic security, whether stemming from terrorism or violence related to the upcoming elections in 2015.
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