Fitch raises Nigeria’s rating to BB- …Outlook stable
ABUJA-In what signalled the return of international confidence in Nigeria’s ongoing economic reforms, Fitch, the world’s leading rating agency, has revised the country’s Outlook from Negative to stable.
The agency also affirmed the Short-term rating at ‘B’ and Country Ceiling at ‘BB-‘ The agency also affirmed Nigeria’s Long-term foreign currency Issuer Default Rating (IDR) at ‘BB-‘ and Long-term local currency IDR at ‘BB’.
In an official statement by the agency to the Federal Ministry of Finance, Victoria Kalema, a Director in the rating agency’s Sovereign Group said “the revision of the Outlook on Nigeria’s ratings to Stable from Negative reflects an improved outlook for reforms following elections in April and the appointment of a strong economic team.
In addition, tighter monetary policy and slightly better fiscal discipline have arrested the rapid pace of reserves decline seen in the first three quarters of 2010, which had prompted the Negative Outlook in October last year.
“The Stable Outlook anticipates continued reforms progress, a tighter budget for 2012, including progress towards scrapping the petroleum subsidy and making the Nigeria Sovereign Investment Authority, the sovereign wealth fund, operational.
” Overall, Fitch’s opinion on Nigeria was “Nigeria’s key credit indicators – strong growth, low public debt and a strong external balance sheet continue to provide strong support to the rating.”
According to Fitch the positive indicators that informed its current rating were:
Key planned regulatory reforms in the power and oil sector are moving ahead.
The reform will reduce foreign exchange and fiscal leakage and reduce pressure on Nigeria’s reserves, promote more efficient energy usage and spur downstream investment.
The planned reforms to the agriculture sector would improve output and productivity and increase rural incomes, with a huge medium- term positive impact on the economy, even if they are only partially implemented.
Fitch had in its ratings in October, last year, lowered Nigeria’s outlook rating from stable to negative citing the depletion of its windfall oil savings and heightened political uncertainty ahead of the April 2011 elections.
The ratings agency had also indicated that it would further lower its assessment of Nigeria’s economic prospects if the country did not follow through with post-election reforms to put the economy on a sustainable path.
Shortly after the general elections, Fitch threatened to even downgrade Nigeria’s ratings if the new government failed to implement reforms that could improve the nation’s outlook.
“if reforms are implemented, the rating outlook could be reversed back to ‘stable’, but if not it could be downgraded to ‘B+’, Reuters quoted Kalema as saying in a May 2011 interview.
Dual-headquartered in New York and London with 51 offices worldwide, Fitch Ratings positions itself as a global rating agency dedicated to providing value beyond the rating through independent and prospective credit opinions, research and data.