Fitch affirms Nigeria at BB- with stable outlook

By bne IntelliNews April 11, 2014

Fitch Ratings affirmed its long-term foreign and local currency Issuer Default Ratings (IDR) on Nigeria at BB- and BB, respectively, with stable outlooks. Fitch noted that the foreign exchange market and international reserves have been stabilising after the shock of central bank governor Sanusi's suspension on February 20 with the inter-bank NGN/USD rate strengthening from its lows, although remaining outside the upper limit of the 155 plus or minus 3% band. Despite having fallen during the past year, reserves remain in line with BB peer medians at a Fitch projected 4.6 months current account payments (CXP) at end 2014.

The ratings agency said that the central bank should retain its autonomy over monetary and financial policies, notwithstanding the suspension of the former governor. In March, the bank tightened further its monetary stance with an increase in the private sector cash reserve requirement to 15%, despite a fall in inflation to a new low of 7.7% in February, within the target range of 6%-9%.

Other factors supporting the ratings on Africa’s biggest oil producer include improving oil production and increased efforts to tackle pipeline vandalism and oil theft, which have contributed to a rise in the Excess Crude Account (ECA) in March; the approval of a tight budget for this year, which aims to boost the ECA and envisages lower revenue (more realistic) and spending; a low debt burden of 12.6% of the recently rebased GDP; continued strong economic growth, which has averaged 6.8% over the past five years, led by non-oil growth of an average 7.7%; and relatively strong current account surplus, debt service ratio and external liquidity.

Fitch noted that the GDP rebasing exercise showed a more diversified economy, with the non-oil sector comprising 86% of GDP and services accounting for 52% of GDP (previously 29%), while the share of the oil and agriculture sectors have been reduced. On the other hand, FDI is less than 1% of GDP, amongst the lowest in the region, reflecting, according to Fitch, poor infrastructure, inadequate power supplies and widespread corruption.

Fitch said that Nigeria's ratings are constrained by weak governance, low per capita income, the vulnerability of public finances and reserves to oil price volatility, and some political and security uncertainty ahead of the February 2015 presidential and gubernatorial elections.

Related Articles

South Africa’s MTN to invest $350mn in Iranian broadband

South Africa’s MTN said it has agreed, on a non-binding and preliminary basis, to invest an initial $350mn into Iranian fixed broadband provider Iranian Net. The investment will give ... more

South Africa receives another downgrade to junk

Fitch Ratings on April 7 downgraded South Africa to junk status following the removal of Pravin Gordhan as finance minister and the enusing political crisis. Fitch's downgrade to 'BB+' ... more

S&P downgrades South Africa's credit rating to junk after cabinet reshuffle

Standard & Poor’s ratings agency has cut South Africa's sovereign credit rating to 'BB+' from 'BBB-' and the long-term local currency rating to 'BBB-' from 'BBB', both with a negative ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss