By Modupe Gbadeyanka
Renowned rating agency, S&P Global Ratings, has affirmed its ‘B/B’ long- and short-term sovereign credit ratings on Nigeria with a stable outlook.
In a statement issued by the firm last Friday, it also affirmed its long- and short-term Nigeria national scale ratings at ‘ngA/ngA-1’.
It was explained that the stable outlook reflected the balance between risks of heightened domestic political tensions, against the potential for an improving external position.
According to S&P, the ratings on Nigeria were supported by a relatively low general government debt stock, but stressed that the “debt-servicing costs are high.”
It further noted that the ratings remain constrained by Nigeria’s low economic wealth, weak institutional capacity, lower real GDP per capita trend growth rates than peers at similar development levels, and external risks.
“Although external indebtedness is relatively modest, significant stock-flow data mismatches raise external risks, in our view,” the statement said.
The rating agency disclosed that the “political decision-making in Nigeria can be unpredictable and we perceive very high levels of corruption in the country.
“We view government institutions as relatively weak, with slow decision-making on policy issues. Fiscal budgets are frequently passed well after the year has begun, which impedes the government’s responsiveness to economic challenges. We also view decision-making at the federal level as largely centralized in the office of President Buhari.
“We note, however, that the federal system of government helps to redistribute wealth and spread power to some extent. While security risks have slightly abated compared with the last two years, we still see sporadic attacks by Boko Haram in the North East, as well as attacks on oil pipelines in the Niger delta.”
According to the company, Nigeria has a democratic political system with a tested transfer of power between different political parties, last witnessed in the 2015 general (presidential and parliamentary) elections and the next general elections are scheduled to take place in February 2019 and state elections are set for March 2019.
“Following some switching of parties by key leaders from the All Progressives Congress (APC) to the People’s Democratic Party (PDP), we expect the forthcoming elections will be hotly contested between the two main political parties.
“Our base case is that the elections will proceed smoothly, as was the case in the last general election in 2015.
“However, there could be downside risks related to subsequent increased tensions and potential political unrest hindering the effective functioning of government institutions. Sitting president Muhammadu Buhari will stand as the APC candidate, whereas the PDP has not yet chosen its presidential candidate. We do not expect any major changes in policy direction as a result of the elections. However, there could be some fiscal slippage,” it said.
