Nigeria’s position hasn’t moved on one of the Big Three credit rating agencies, Fitch Ratings. The ratings, which informs investors about a country’s creditworthiness, also gave a negative outlook based on concerns about the sustenance of the current economic growth experienced in the country.

Fitch Ratings revealed it on Thursday that Nigeria will retain its Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B+’ with a Negative Outlook. Also, the Long-Term Local-Currency IDR affirmed at ‘B+’; Outlook Negative, while Short-Term Foreign-Currency IDR is at ‘B’ and Short-Term Local-Currency IDR affirmed at ‘B.’

“The ‘B+’ rating reflects Nigeria’s position as Africa’s largest economy and most populous country, its net external creditor position, and its well-developed domestic debt markets, balanced against a high level of hydrocarbon dependence, low levels of domestic revenue mobilisation and GDP per capita, and low rankings on governance and business environment indicators. The Negative Outlook reflects uncertainty about the sustainability of the economic growth momentum as the impact of earlier shocks eases and progress on addressing high-interest service ratios,” the press release from the agency said.

Since introducing the Investors & Exporters (I&E) window in April 2017 and instituting a ban on some imported goods, Nigeria’s foreign reserves position has increased to a four-year high due to stronger oil revenues and bond placements in foreign-currency. As of end-April, gross reserves were at US$47.5 billion,  which is equivalent to eight months of current external payments. These positive developments allowed the country to keep its position this year. The agency also acknowledged growth in non-oil revenue to 3.4 percent of GDP and expects it to “continue growing slowly as a result of new revenue measures and efforts to increase the tax base.”

In 2016, Fitch Ratings had downgraded Nigeria to B+, from BB-, with a stable outlook, as a reflection of the poor performance of the Naira against the dollar.

The credit rating position often helps investors in sovereign wealth funds, pension funds and other investors to determine the credit quality of an individual debt issue and the relative likelihood that the issuer may default. Meaning, a favourable rating enables the government to raise capital at lower rates in the international financial market.

The agency stated that “the government’s inability to substantially increase domestic revenue mobilization remains a key rating weakness.”

Fitch also noted that the current tight monetary conditions will continue to “weigh” on the growth of the economy, but predicts that Nigeria’s GDP growth would accelerate to 2.4 percent in 2018, higher than the 2.1 percent prediction of the International Monetary Fund (IMF).

The credit rating agency expressed its concern on the “segmented and continued use of exchange controls,” which, according to Fitch, have inhibited greater foreign-currency liquidity and capital inflows.

The upcoming 2019 elections pose a major risk to the economy. Insecurity under a tensed political atmosphere could reduce oil production and significantly cut revenue.

Brent, the international benchmark for oil prices, hit a high of $80.50 a barrel on Thursday, its strongest level since Nov. 24, 2014, when it topped out at $80.85. Africa’s top oil producer surely has a new opportunity, with stronger oil receipts, to completely turn around its flailing economy, improve its international ratings and facilitate economic development.  However, Fitch doesn’t foresee any developments that would lead to an upgrade in the country’s rating in the near future.


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