Standard Poor's
Global rating agency, Standard Poor’s, SP, yesterday, expressed confidence in the Nigerian economy, as it upgraded its outlook on the country’s credit rating to positive, from stable.
The upgrade, according to a statement by the rating agency, is inspired by the restructuring undertaken by the Federal Government and the strengthening of the banking sector.
Standard and Poor’s also affirmed Nigeria’s current rating — ‘B+/B’ long-and short-term issuer credit ratings and the ‘ngA+/ngA-1’ long- and short-term Nigeria national scale ratings, while the transfer and convertibility (TC) assessment remains unchanged at ‘B+’.
At ‘B+/B’, Nigeria is three steps away from the minimum investment grade.
According to the ratings agency, its new positive outlook means there is now at least a one-in-three likelihood of an upgrade if Nigeria’s reform initiatives support economic growth, build stronger buffers against Nigeria’s dependence on petroleum revenue and reduce pressure on the exchange rate.
SP said a potential upgrade of Nigeria’s credit rating would be “predicated upon no worsening of the political tensions between the Islamic north and Christian south and no significant deterioration in the country’s fairly weak performance on international corruption and ease-of-doing-business measures.”
It stated further: “Alternatively, we could revise the outlook to stable if fiscal and external balances fail to improve. This could be, for instance, as a consequence of a sharp drop in oil production or prices, or if political tensions or violence increase substantially, affecting overall political stability in the country.”
SP said its ratings on Nigeria are constrained by its view of the country’s internal political tensions, weak political institutions, and faltering efforts to institute buffers that will allow countercyclical policy options.
According to the rating agency, Nigeria also has a low level of development and significant infrastructure shortfalls, while inconsistencies in reported external data also constrain the ratings.
It noted that the ratings are supported, however, by low fiscal and external debt burdens, owing to debt write-offs in 2005 and 2006 and high petroleum prices supporting exports and government revenues in recent years.
Continuing, the ratings agency said, “After national elections in May 2011 and strong GDP growth rates over the past few years, Nigeria has tightened its fiscal and monetary stance by reducing projected fiscal deficits and by raising its monetary policy rate. It plans to cut a fuel subsidy, which we understand had been paid from the Excess Crude Account (ECA) in the past.
“This is one of several important reform initiatives President Goodluck Jonathan has promoted since he succeeded late President Yar’Adua in February 2010.”
Author: Chief Editor
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