Fitch downgrades Nigeria to ‘B’, negative outlook

Logo of Fitch Ratings

Fitch Ratings has downgraded Nigeria’s long-term foreign-currency issuer default rating to ‘B’ from ‘B+, which means the outlook is negative.

The downgrade and negative outlook reflected the aggravation of ongoing pressures on Nigeria’s external finances following the recent slump in oil prices and the pandemic shock. Intensifying external pressures raise risks of disruptive macroeconomic adjustment given Nigeria’s precarious monetary and exchange rate policy setting and lack of fiscal buffers.

The shock would also raise government debt and interest payment-to-revenue ratios from already particularly high levels and lead to a renewed economic recession, Fitch ratings stated.

It stated, “The plunge in international oil prices, which we assume will average of $35/barrel in 2020 after $64.1/barrel in 2019, highlights Nigeria’s high dependence on the oil sector, with hydrocarbon revenues representing 57 per cent of current-account receipts and nearly half of fiscal revenue over the last three years. “This shock exacerbates the overvaluation of the naira and remedial policy actions taken by the Central Bank of Nigeria will not suffice to address deteriorating external imbalances, in our view.

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