Fitch released its latest rating on Nigeria affirming a Long-term foreign and local currency Issuer Default Rating (IDRs) at ‘BB-‘ and ‘BB’ respectively. Whilst this suggest things having gotten better but hasn’t got worse either, the rating agency also reveals future events that could affect its decision to either downgrade or upgrade the current rating.
Factor that can lead to a downgrade
- A policy response to lower oil prices that undermines growth prospects, public finances or external stability
- A loss of foreign exchange reserves or an increase in government debt/GDP
- Reversal of key structural reforms and anti-corruption and transparency measures.
What could lead to Nigeria’s outlook remaining stable
- Implementation of monetary and exchange rate policies consistent with macroeconomic and external stability
- Containment of fiscal pressures and a manageable debt burden.
- Fitch forecasts Brent crude to average USD55/b in 2015, USD60/b in 2016 and USD70/b in 2017.
- Fitch does not expect a major resurgence of violence in the Delta region.
Based on the above, it is highly unlikely that we will see a downgrade as the three main factors are high up in the current Government’s agenda as well as the CBN. The Buhari Government has anti-corruption, economic growth and job creation as some of its main objectives, whilst the CBN is focused on maintaining exchange rate stability and reserves.
