Fitch re­vises its Nige­rian out­look to neg­a­tive


FITCH Rat­ings re­vised the out­look on Nige­ria to neg­a­tive from sta­ble over con­cerns that a lack of for­eign ex­change will ham­per the econ­omy, and af­firmed the West African na­tion’s rat­ing at B+, four steps below in­vest­ment grade.

While Nige­ria’s econ­omy will prob­a­bly ex­pand at 1.5 per­cent this year, af­ter con­tract­ing by an es­ti­mated 1.5 per­cent in 2016, the non-oil in­dus­try will con­tinue to be con­strained by for­eign-cur­rency short­ages, the rat­ings com­pany said on Wed­nes­day.

“Ac­cess to for­eign ex­change will re­main se­verely re­stricted un­til the Cen­tral Bank of Nige­ria can es­tab­lish the cred­i­bil­ity of the in­ter­bank for­eign-ex­change mar­ket and bring down the spread be­tween the of­fi­cial rate and the par­al­lel mar­ket rates,” Fitch said.

Trad­ing vol­umes re­main low. They were $8.4 bil­lion (R111.88bn) in De­cem­ber, com­pared with $24bn in De­cem­ber 2014, ac­cord­ing to Fitch.

While gov­ern­ment debt re­mains low at 17 per­cent of gross do­mes­tic prod­uct, the short­age of state rev­enue “poses a risk to debt sus­tain­abil­ity”, ac­cord­ing to Fitch.

The gov­ern­ment’s debt stood at 281 per­cent of rev­enue as of the end of 2016, and while 77 per­cent of that is do­mes­tic, for­eign-cur­rency bor­row­ing is in­creas­ing, the com­pany said.

The yield on Nige­ria’s Eurobond due in 2023 rose three ba­sis points to 6.76 per­cent at 9.04am in the cap­i­tal, Abuja, yes­ter­day.

Fitch partly hinges its fore­cast for the econ­omy to ex­pand this year on in­creased oil rev­enue, be­cause of a re­bound in crude prices and an in­crease in out­put to an aver­age of 2.2 mil­lion bar­rels a day com­pared with 1.8 mil­lion bar­rels pumped in Oc­to­ber. – Bloomberg

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