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Fitch, an international credit rating organisation, has downgraded Nigeria’s economic outlook from stable to negative while affirming the B+ rating.

In a fresh report obtained by Nairametrics, Fitch stated that the downgrade of Nigeria’s economic outlook is traceable to the disruptive macroeconomic policies under the administration of President Muhammadu Buhari.

According to Fitch, the downgrade of Nigeria’s economic outlook reflects the increasing vulnerability from the current macro policy setting in Nigeria, Central Bank’s complex regulatory measures, rising country’s debt, low fiscal revenue and uncertainty in governance.

Vulnerability in Nigeria’s macro-policy settings

In the report, the American rating firm stated that the increasing vulnerability from the current macro-policy setting has raised risks of disruptive macroeconomic adjustment in the medium terms and continued a real appreciation of the Naira.

  • According to Fitch, a sharp devaluation of the exchange rate under the current policy framework would stoke macroeconomic volatility and significantly weaken some of Nigeria’s key credit metrics, including its GDP per capita.
  • Fitch also noted that the substantial real appreciation of the naira over the last year appeared uncorrelated with macroeconomic fundamentals and was set to continue, driven by high inflation.
  • It was stated that commodity terms of trade had deteriorated somewhat and would decline further, weighed down by lower oil prices.
LDR: Growing the real sector by fiat?, Rapid increase in food prices temporary – Emefiele, CBN and other industry stakeholders establish N1 billion Bankers’ Charitable Endowment Fund , How the CBN’s OMO restriction is affecting the market  , Nigerian economy to grow by 2.38% in Q4 - CBN 
Godwin Emefiele

[READ MORE: Nigeria’s economic growth lower than non-oil dependent nations- IMF)


Central Bank’s unconventional Policies

While providing further details on the state of the Nigerian economy, Fitch delivered an assessment of the policies on the Central Bank of Nigeria (CBN). According to Fitch, the CBN is striving to maintain a stable nominal exchange rate through an array of unconventional and economically costly policy measures.

  • First, Fitch noted that major risks stemmed from the central bank’s policy of attracting portfolio investments in its short-term Open Market Operations (OMO) bills through high yields and hedging instruments offered to non-resident investors at low cost, despite a wide margin between the naira and dollar interest rates.
  • As a result, non-resident holdings of the CBN’s OMO bills soared to $17 billion by end-August, equivalent to 40% of foreign-currency reserves at the time.
  • The credit rating organization noted that challenges to the durability of the current policy setting were underscored by increasingly complex regulatory measures taken by the CBN to reconcile attracting foreign investments in OMO bills and spurring bank lending.
  • Fitch further noted that the Central Bank has also recently limited operations in the OMO to banks only, and separately imposed a floor on bank loan-to-funding ratios to support credit growth.
  • Hence, it was disclosed that lower OMO market liquidity due to a narrower range of participants is likely to have dampened net portfolio inflows, contributing to a 12% drop in FX reserves in November.

Current Account Deficit to persist hits 24 years low

In order words, Fitch disclosed that the Current Account (CA) balance had shifted to deficit from a long-standing surplus, pointing to deteriorating macroeconomic imbalances and adding to external vulnerability.

  • According to Fitch, the CA would record a deficit of 1.6% of GDP in 2019, its second-weakest level in 24 years, after a surplus of 2.6% in 2018. Meanwhile, Fitch forecasts the CA deficit would moderate to an average of 0.7% of GDP in 2020-2021.
  • The rating firm’s also disclosed that foreign exchange reserves in Nigeria would average 4.7 months of CA payments over 2019-2021, down from 6.1 months in 2018.

Rising debts and weak reforms 

Fitch further disclosed that debt remains on an upward path in Nigeria while particularly low fiscal revenues and public fund mismanagement constrain the sovereign’s ability to support a rising debt burden.

Standard chartered
  • Fitch predicts that debt/revenue ratio which is particularly high, at 333% (Federal government (FGN), debt: 777%) in 2019, will rise close to 400% (FGN debt: 922%) in 2021, well above the forecast ‘B’ median of 248%.
  • Weaknesses in public fund management are illustrated by rising monetary financing, a large and uncertain amount of government arrears, and a multitude of contingent liabilities on which transparency is poor.
  • Fitch forecasts that as Nigeria’s low non-oil fiscal revenues linger, the government deficit will deepen.
  • Also, inflation is high and poised to accelerate. Fitch projects Nigeria will average 13% in 2020-2021 from 11.3% in 2019, well above the forecast ‘B’ median of 5% and inflation rates in Nigeria’s main trade partners.
  • According to Fitch, the acceleration in inflation will be driven by a host of recently enacted policy measures which include the upcoming raise of the VAT rate, 66.7% hike of the minimum wage, as well as the recent closure of land borders to foreign trade and tightening restrictions on FX financing for a wide range of imports.
Minister of Finance Zainab Ahmed, VAT
Zainab Ahmed

[READ ALSO: Nigeria’s Inflation rate drops to 11.02% in August 2019 despite border closures)

In conclusion, Fitch projects average GDP growth of 2.4% in 2019-2021, well below the ‘B’ median of 3.4% and the five-year average demographic growth rate of 2.7%.

Standard chartered

Fitch noted that the prospects for supply-side, fiscal and exchange-regime reforms that could tackle the major constraints for Nigeria’s credit profile are weak, as reflected by the record in recent years.



  1. Thank you ooh Fitch. We Don Hear.

    The primary problem in Nigeria is institutionalized Rent-seeking, this scam created by Lawyers and Accountants for monopoly access to unregulated 3rd party fees is what has stagnated Nigeria. simple and short.

    To fix this problem every single legislation,regulation and policy existing in Nigeria that has to do with prosperity needs to be reviewed. easier said than done when there are people working deliberately every day against the prosperity of Nigerians. This is why i have even suggested in the past that this is a matter of national security that should also be over seen by security agencies.

    One of the most powerful repairs i have seen so far are the highlights of the finance bill (even though we cant find the actual document anywhere), once it becomes law Nigeria should see a boost in economic activity.

    But because these problems are often interlinked across multiple agencies we usually do not get the full out come/potential of a fix.

    For example finance Bill makes a big fix in the tax laws, but it forgets about CAC or CAMA which reads like a landmine for SMEs while CAC is also trying to treat private businesses like public held companies. CAC also failed to fall in line with VAIDS at a time.

    Then you also have the issue of agencies over-complicating processes, which we now know its only to facilitate rent-seeking. Why is FIRS or any state agency requiring people and small organisations to file anything? and why do they have to do it every month?

    Sometimes you have to ask if these people are completely mad, are you paying this companies? or you are expecting them to burden the extra cost out of thing air? as cost that can be sometimes as high as half of their share capital?

    and that is assuming they dont have anything better to do.

    If everyone can open/have a bank account, why cant they opt to have their taxes deducted automatically from deposit?

    Why do you have to have so many taxes for people and businesses to pay? why cant federal and state government agree a fixed percent of deposit that should be deducted as tax that covers every goddamn tax?

    You can not tell me all these legal and accounting professionals do not know this with all their stupid qualifications that they have been using to rob Nigeria in daylight. instead they provide stupid advice that has cost so much damage to this country and loss of life.

    Yes, some people with complex transactions will prefer to manually file especially large corporations, but that’s only a small percent (especially if you’re not just stealing their money) and those people can be effectively audited by FIRS.

    Again simple and short. but rent-seekers dont want simple and short they want to institutionalize rent-seeking that why they create complexity at the end of the day they will confuse you so you dont know they are robbing you.

    And look, if we want to protect against rent-seeking in the future we can not have shields and bubbles for civil-servants, because as it is today every Nigerian civil servant lives in a bubble that protects them from the reality of their action in office, even when they are dismissed in the middle of service or from office for wrong doing.


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