By Modupe Gbadeyanka
Notable rating agency, S&P Global Ratings, has affirmed its ‘B/B’ long- and short-term sovereign credit ratings on the Federal Republic of Nigeria.
In a statement issued by the agency on Friday, September 15, 2017, it also said the outlook is stable, adding that it further affirmed its long- and short-term Nigeria national scale ratings at ‘ngBBB/ngA-2’.
S&P explained in the statement that the stable outlook signals its assessment that the oil sector improvements will support higher economic growth, fiscal revenues, and higher current account receipts over the next 12 months.
“We may lower the ratings if we observe a significant acceleration in the accumulation of government debt beyond our current forecast, and if external financing gaps become larger and more difficult to fund.
“We could also lower the ratings if temporary foreign exchange restrictions remain in place for an extended period.
“We could raise our ratings on Nigeria if we see significantly higher economic growth prospects than our base case,” the rating firm stressed.
It further said the ratings on Nigeria are constrained by our view of its low level of economic wealth, weak external position, real GDP per capita trend growth rates below those of peers with similar levels of development, and future policy responses that may be difficult to predict.
“Following a contraction in the real GDP growth rate of 1.5% in 2016, we now expect Nigeria’s economy to expand at a still weak 1% in 2017, supported by rising oil and agriculture production and easing foreign exchange (FX) liquidity conditions.
“The ratings are supported by relatively low general government debt but high debt servicing costs and modest fiscal deficits. We expect that improvements experienced in 2017 with higher crude oil production will help increase foreign currency supply and keep the current account largely in balance. International foreign reserves remain stable as a result.
Adedapo Adesanya