Global rating agency, Standard & Poor’s (S&P), has affirmed its ‘BB-/B’ rating on Nigeria.
However, S&P in the latest rating on Nigeria stated that the country’s outlook remains negative, pointing out that there was at least a one-in-three chance “that we could lower the ratings on Nigeria if institutional governance effectiveness deteriorates, or if fiscal or external balances weaken beyond our current projections”.
S&P said the rating was constrained by its view of Nigeria’s low Gross Domestic Product (GDP) per capita, significant infrastructure shortfalls, political tensions, and weak institutions.
However, it noted that the country benefits from low government and external debt burdens, ample oil reserves, and robust non-oil GDP growth.
Furthermore, S&P anticipates petroleum prices would largely remain high, which would support exports and government revenues.
It also acknowledged a series of reforms in agriculture, the privatisation of the power sector, and the rapid growth of sectors such as telecoms and financial services, which have contributed to the country’s growth momentum.
“However, oil production has stagnated, as new investment holds out for the passage by parliament of the long-awaited Petroleum Investment Bill (PIB).
“Nigeria’s real GDP continues to grow strongly and we forecast that it will average 6.3 per cent a year in 2014-2017, driven primarily by non-oil growth and strong services growth.
“In addition, external and fiscal debt stock burdens are low. Nevertheless, political jockeying is high in the run-up to the February 2015 elections, which may test Nigeria’s institutions and fiscal resilience; and militancy in the North-east continues to flare.
“We are affirming our sovereign credit ratings on Nigeria at ‘BB-/B’. The outlook remains negative, indicating at least a one-in-three chance that we could lower the ratings on Nigeria if institutional governance effectiveness deteriorates, or if fiscal or external balances weaken beyond our current projections,” it added.
