Fitch affirms Nigeria at “B plus” with stable outlook


Fitch Ratings, a global credit rating agency, has affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) rating at ‘B+’ with stable outlook, after it saw support in the positive trajectory of the economy and a better performing global oil market in 2019.

The International Ratings which is one of the biggest three credit rating agencies, alongside Moody’s and Standard & Poor’s, believes with the uneventful completion of the 2019 general elections Nigeria’s economy has become less risky, while the return of incumbency would serve as a positive in fast-tracking policy implementation.

Consequently, Fitch expects to see continuity in policy, although it notes impediments to long-term growth in feeble reforms, weak economic management and possible delays in approving key legislation on the heels of the tendency of the presidency and lawmakers to be at loggerheads.

The international rating agency estimates a decline of General Government deficit to 3.6 percent of GDP in 2018 as against 4.5 percent in 2017.

Fitch however forecasts the General Government deficit to worsen to 3.8 percent of GDP in 2019 “and further to 4.6% in 2020 as the rise in oil production with the coming on stream of the Egina oilfield will be offset by the decline in oil prices under our baseline,” the rating agency noted.

Federal government’s deficit is projected to hit 2.6 percent and 3 percent of GDP in 2019 and 2020 respectively.

Fitch highlighted vulnerability in the FG’s wallet which continues to depend largely on oil revenue.

“Public finances are vulnerable to disruptions to production caused by recurrent acts of vandalism or other force majeure affecting Nigeria’s aging oil infrastructure,” the rating agency warned, adding that a USD10 change per barrel in the Brent oil price would likely impact the General Government balance by around 0.6 percent of GDP.

Overall the agency was guided by assumptions that Oil and gas revenues has accounted for 44% of general government revenues and 60% of current-account receipts over the last five years.

The agency forecasts a stable Nigerian oil production volume of 2 million barrels per day (mmbpd, including condensates) in 2019 and 2020 against a 2019 budget assumption of 2.3 mmbdp.

Fitch also projects Brent oil prices to average USD65/barrel in 2019 -against a budget projection of USD60- and USD62.5/barrel in 2020, down from USD71.6/barrel in 2018.

Other commodity prices and global economic trends have been assumed to develop as outlined in Fitch’s most recent Global Economic Outlook published in March 2019.