Fitch Ratings
Global ratings agency, Fitch Ratings has threatened to downgrade Nigeria’s rating to B+ from BB- if the newly-elected government fails to implement badly needed reforms post-elections, to improve the country’s outlook.
Reuters quoted Fitch’s Director of Sovereign and International Public Finance, Veronica Kalema, to have made this remark Wednesday
Fitch Ratings had lowered Nigeria’s sovereign credit outlook to negative last October from stable, citing the depletion of its windfall oil savings and heightened political uncertainty ahead of elections at the time.
Although the successful conclusion of elections in the country has removed some political uncertainty, the Fitch Senior official, pointed out that the new administration must implement reforms if its credit rating is to improve.
Kalema stated: “With oil prices where they are, implementation of reforms will see the ratings improve but lack of reform progress will keep the rating where they are and if oil prices fall, the ratings will come under downward pressure.”
President Goodluck Jonathan had won the just concluded Presidential election with a wide margin, ending political uncertainty in Nigeria.
Kalema insisted that the elections have been more credible than previous ones, marking a positive sign for the country but that wasn’t sufficient to make a ratings change.
“If reforms are implemented the rating outlook could be revised back to stable, but if not it could be downgraded to ‘B+’,” she added.
Kalema further advised the new government to implement reforms including establishing a sovereign wealth fund to protect its windfall oil savings and run a more fiscally prudent budget before the country’s ratings outlook can be raised.
As Africa’s top oil exporter, Nigeria relies on the commodity to generate more than 70 percent of the government revenues. Although oil prices have largely traded above $100 per barrel since the beginning of the year but Nigeria’s credit rating remains hampered by poor governance, Kalema said. She reiterated that Fitch plans to visit Nigeria in August to better assess the new administration’s policies.
Analysts say risk perceptions for Nigeria have improved after the elections and the potential for policy continuity could encourage the return of foreign capital to the country.
Author: Chief Editor
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