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Economy & Politics

Fitch Ratings: Nigeria clinches a stable ‘B’ Issuer Default Rating

Nigeria has been upgraded by Fitch Ratings in its recent Global Economic Outlook.

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CBN to hold MPC meeting next week, Demand for credit by household increases in Q2 2020 - CBN, CBN grants licenses to 3 Payment Service Banks, Mobile money loan CBN Governor, CBN, Three PSBs get Apex Bank’s provisional to commence operations, Milk Import: Experts advise CBN on FX restriction , CBN automates trading system, introduces electronic form to facilitate exports , CBN campaigns for Made-in-Nigeria products , CBN recent macroeconomic policies, others lead to a higher Fitch rating; from negative IDR to a stable ‘B’ rating, AGSMEIS: CBN expand beneficiaries to 14,638.

Fitch Ratings has revised the Outlook on Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to Stable from Negative and affirmed the IDR at ‘B’.

On the reason for the upgrade; information available on the firm’s website revealed that  a decrease in the level of uncertainty surrounding the impact of the global pandemic on the Nigerian economy, increasing relative stability in oil prices, easing of global funding conditions, and domestic restrictions on movement have all played a key role in the new outlook.

READ: Shell to cut 9,000 jobs globally due to oil price crash as it shifts to clean energy

The latest rating is based on some underlying assumptions such as; the report expects global economic trends to develop as outlined in Fitch’s most recent Global Economic Outlook, published 7 September 2020. The report also projected Brent oil prices to average USD41/barrel in 2020, USD45/barrel in 2021, and USD50/barrel in 2022. In addition, the report expects Nigeria’s oil production volume to average 1.93mbpd in 2020, 1.87mbpd in 2021, and 2mbpd in 2022, all things being equal.

According to the report, Nigeria recorded an ESG score of 5 for both political stability and rule of law, institutional, and regulatory quality. The country also recorded an ESG score of 4 in both human rights and freedom and creditors’ rights.

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Recall that the key evaluation criteria for Fitch ratings of either positive or negative are usually; external finances, macroeconomic policies, and public finance.

(READ MORE: Nigeria faces prolonged exchange rate crisis as oil prices remain stuck at $40)

On the external finance criterion, the report stated that; “Nigeria has navigated external liquidity pressures from the shock, through partial exchange rate adjustment combined with de facto capital flow management measures and foreign-currency (FC) restrictions, while disbursement of external official loans has supported the level of international reserves. Though external vulnerability persists from currency overvaluation and a possibly large FC demand backlog, this is adequately captured by the ‘B’ rating, in our view,”

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In terms of monetary policy which is a subset of macroeconomic policies, the report highlighted that; “The Central Bank of Nigeria (CBN) continues to prioritize exchange rate stability over other policy goals, in Fitch’s view. A 6% depreciation in March of the Investor and Exporter (I&E) exchange rate, at which most FC transactions are carried out fell short of fully correcting the naira’s appreciation by about 35% in real terms, between mid-2016 and February 2020. Steep real appreciation has been driven by persistent double-digit inflation, which has offset gains from the devaluations in 2016 and 2017. Meanwhile, the CBN has achieved progress towards its stated goal of unifying the exchange rate, following a cumulative 19% two-step devaluation of the ‘official’ exchange rate, which is mostly used for the government’s and the oil sector’s FC transactions.”

READ: Nigerian economy since 1980: Are we under a resource curse?

On the fiscal policy and public earnings, the report added that; low fiscal revenues are a major credit weakness. GG receipts averaged 6.8% of GDP in 2015-2019, well below the current ‘B’ median of 22%. Revenues will benefit from the removal of the fuel subsidy, which has cumulatively cost the budget around 7% of 2019 GDP in 2016-2019.

The government has affirmed its firm commitment to this reform as well as its intention to continue phasing out costly electricity subsidies. However, the energy price reform faces strong opposition from labor unions, and the authorities have reinstated subsidies in the past, in response to social protests.

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Economy & Politics

Gbajabiamila roots for the review of Federal Character Laws

House of Reps Speaker has called for the review of the federal character structure the country runs.

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House of Reps to make Youths globally competitive, Closing of Nigerian-owned shops in Ghana must be dealt with decisively - Femi Gbajabiamila, Lagos State needs N1 trillion for reconstruction - Femi Gbajabiamila

The speaker of the House of Representatives, Hon. Femi Gbajabiamila, has lent his voice to one of the pressing issues in Nigeria, which concerns reviewing the Federal Character Laws as enshrined in the 1999 constitution.

The honourable speaker made the revelation during the Young Parliamentarians Forum (YPF) National Strategy Meeting and Retreat in Abuja.

According to him, the need to broaden the scope of the federal character laws in the Nigerian constitution has become imperative.

He is of the opinion that it contrasts with the nation’s realities, as it limits national opportunities to geographical spread alone, without factoring in other criteria like gender, persons living with disabilities, and age classification.

What they are saying

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Commenting on the need for the review of the federal character laws in Nigeria, Hon. Gbajabiamila said:

In thinking outside the box, I think we should consider an amendment in the constitution to the definition of federal character because when we talk about Federal Character within the context of appointments, infrastructure and the rest of it in the constitution, Federal Character as it is, is limited to where you are from, like your ethnicity.

“I think it’s time that we expand the definition of Federal Character because the character of a Nation is not just based on your tribe, it’s based on Religion, it’s based on where you are from, it’s based on your sex, it’s based on your age. So when you are talking about Federal Character you look at all those things and they are what make up the Federal Character.”

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The Speaker ended by charging the young legislators to provide solutions to some vital questions on burning national issues.

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Economy & Politics

FAAC disburses N682.06 billion to 3 tiers of govt in September [Full-List]

FAAC disbursed the sum of N682.06bn to the three tiers of government in September 2020.

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States lose N35.51 billion to bail-out , FAAC disburses N650.8 billion as South-South states receive highest share

The Federation Account Allocation Committee (FAAC) disbursed the sum of N682.06bn to the three tiers of government in September 2020. This is contained in the latest monthly FAAC report released by the National Bureau of Statistics.

According to the report, the federal allocation of N682.06bn disbursed to the three tiers (FG, States and LGAs) indicates a 1% marginal increase when compared to N676.4 billion disbursed in August 2020.

READ: FAAC disburses N647.35 billion in February as allocation drops further

Explore the Advanced Financial Calculators on Nairametrics

The Breakdown

A cursory look at the report showed that in September, the Federal Government received a total of N272.90bn (40%), States received a total of N197.65bn (21.6%) and Local Governments received N147.42bn (21.6%). The sum of N30.88bn (4.5%) was shared among the oil producing states as 13% derivation fund.

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In addition, revenue generating agencies such as Nigeria Customs Service (NCS), Federal Inland Revenue Service (FIRS) and Department of Petroleum Resources (DPR) received N6.66bn (1%), N13.48bn (2%) and N5.70bn (0.8%) respectively as cost of revenue collections.

READ: Report accuses World Bank of ‘toying’ with Nigeria over $1.5 billion loan

READ: MTN Nigeria posts N975.76 billion revenue for Q3 2020

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Further breakdown of revenue allocation distribution to the Federal Government of Nigeria (FGN) revealed that the sum of N196.56bn was disbursed to the FGN consolidated revenue account; N4.78bn was disbursed as share of derivation and ecology; N2.39bn as stabilization fund; N8.03bn was for the development of natural resources; and N6.12bn to the Federal Capital Territory (FCT) Abuja.

READ: ASUU insists on rejection of IPPIS, says some Professors get N8,000 as salary

States federal allocation rose marginally

In September 2020, allocation to states rose by 3.4% to N197.65 billion compared to N198.8 billion recorded in the previous month.

The top five states with the largest share of monthly allocation in September are Delta (N13.8 Billion), Lagos (N11.44 billion), Rivers (N11.04 billion), Akwa Ibom (10.33 billion) and Bayelsa (N8.33billion). On the other hand, the top five states at the bottom of the ranking are Ekiti (N3.8 billion), Ogun (N3.7 billion), Plateau (N3.6 billion), Osun (N3.24 billion), and Cross River (N3.23 billion).

READ: FG warns Nigerians about on-going N3million COVID-19 grant scam

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READ: Despite shutdown, Caverton rakes in N8billion in Helicopter and Aircraft revenues

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Key Takeaway

The federal allocation disbursed to the three tiers in September showed consistent improvement, when compared the previous months. However, this is still a short fall when compared to N740.87bn disbursed to the three tiers in the corresponding period of 2019.

READ: Power: Nigeria records transmission peak of 5,459.50MW – TCN

The marginal growth recorded in the disbursed federal allocation may be due to the rise in revenue generation, on the back of earlier improvement in both domestic and cross border economic activities.

For states in Nigeria that largely depend on federal allocation to meet recurrent obligations, this may represent some sort of boost. However, the outbreak of the Covid-19 pandemic (second wave) currently emerging in some developed economies may threaten oil price (the country’s main revenue source), as industrial activities may collapse globally for the second time in the year.

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Economy & Politics

WTO: Nigeria to persuade the US to join the consensus on Okonjo-Iweala – Trade Ministry

Nigeria is making moves to reach out to the US to agreed to appoint Okonjo-Iweala as Director-General of the WTO.

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WTO, Okonjo-Iweala joins South Africa's presidential economic advisory council as nation struggles with recession, Dr. Okonjo-Iweala officially declared candidate with the largest and broadest support among members

The Federal Ministry of Industry, Trade & Investment has said that Nigeria is currently reaching out to the United States and South Korea to back the WTO preferred candidate, Dr. Ngozi Okonjo-Iweala, for the role of DG of WTO.

This was disclosed in a statement by the Ministry and reported by Reuters on Saturday morning.

READ: Why Okonjo-Iweala should win the WTO DG role – Prof. Moghalu

Recall that Nairametrics reported this week that the Ministry of Foreign Affairs announced in a statement that Nigeria’s candidate for Director-General of the World Trade Organization (WTO), Dr. Ngozi Okonjo-Iweala, had secured the support of the majority of the member-nations – but was yet to be declared and returned as the winner, as the United States opposed the consensus.

READ: Smartphone users spend $120 billion on mobile apps in 2019 

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Nairametrics also reported this week that Dr. Ngozi Okonjo-Iweala was close to being appointed as the new Director-General of the World Trade Organisation (WTO). A group of ambassadors also known as “troika” had proposed Okonjo-Iweala to lead the WTO, giving her a clear path to becoming the first woman to head the WTO since it started 25 years ago.

The U.S President, Donald Trump, blocked the appointment of Ngozi Okonjo-Iweala as the WTO’s next DG on Wednesday, declaring support for South Korea’s Yoo Myung-hee instead.

READ: Nigeria’s Vehicle, Aircraft & Vessel import jump 891% in Q3 2018

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The Ministry said that the FG would try to persuade the United States to join the consensus, as most of the WTO’s members had agreed to appoint Okonjo-Iweala as DG.

Nigeria is currently reaching out to all members of the WTO including the United States and South Korea to overcome the impasse as well as persuade the United States to join the consensus,” the trade ministry said.

READ: WTO DG: Okonjo-Iweala gets the backing of 79 countries so far

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