Barely two weeks after the country received and outlook downgrade by Fitch Ratings, Standard and Poor’s, another international rating agency has given the country a pass mark with a ‘B+/B’ Ratings affirmed on resilient economy. It also gave the country a stable outlook, despite what it called ‘high political risk’.
In the report published yesterday, S&P stated, “We consider that the ratings on Nigeria are constrained by high political risk, but supported by a strong balance sheet. We are affirming the ‘B+/B’ global scale ratings and the ‘ngA+/ngA-1’ Nigeria national scale ratings.” The report says Nigeria’s outlook is stable, “reflecting our expectation that Nigeria will maintain its strong external and fiscal balance sheet, and that budgetary performance will gradually improve over the next few years.”
Elections accentuate risk..
The report added that political risk in Nigeria may be exacerbated by the forthcoming presidential elections.
“The affirmation reflects our view that Nigeria’s economic performance and external liquidity has been better than we previously expected, although its fiscal performance has been weaker and political risk could heighten in the run-up to the 2011 presidential elections,” said Standard & Poor’s credit analyst Christian Esters.
It noted that Nigeria remains a low-income country, with GDP per capita estimated at $1.32 billion in 2010. Nevertheless, Nigeria has a strong fiscal debt position, despite the sharp deterioration in budgetary performance since 2009. “We estimate that Nigeria’s general government debt will increase to above 16 per cent of GDP by year-end 2010, which is still a comparatively low level.”
Comfortable external liquidity
The report said Nigeria also benefits from comfortable external liquidity, with continuous current account surpluses. “For 2010, we expect a surplus of approximately 14 per cent of GDP, and gross external financing needs at a low 54 per cent of current account receipts and usable reserves.”
The ratings firm said the stable outlook reflects expectation that Nigeria will maintain its strong external and fiscal balance sheet, and that budgetary performance will gradually improve over the next few years. “We also expect that tensions surrounding the forthcoming April 2011 presidential elections could increase political uncertainty and destabilise the country for some time after the elections,” said Mr Esters.
Finance minister, Olusegun Aganga had rejected the Fitch ratings report on the ground that it did not reflect the effort by government to address the concerns raised. Fitch cited the depletion of the Excess Crude Account (ECA), the decline in foreign exchange reserves and their own concern that the reform agenda of the current administration which they found to be very positive may not be implemented before the elections; the following as the major reasons for the revision of the outlook.
Mr Aganga said, “We do consider the decision to adjust the outlook downwards unduly punitive and disagree with it given the numerous positive features of the country’s economy and ongoing reforms.” He said government has taken a number of measures which include the proposed establishment of a Nigerian Sovereign Wealth Fund and urgent steps which are being taken to address the infrastructure deficit particularly in the power sector as outlined in the Power Roadmap that was unveiled by the President in August.
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