New Telegraph

December 8, 2023

Country Risk Index: Nigeria ranks 4th in West, Central Africa

Nigeria’s country risk of 46.6 ranks it fourth among five top West and Central African countries, Fitch Solutions latest Risk Index Table shows. According to the data, Ghana’s country risk of 53.1 ranks it as the best among the five countries, with Gabon coming 2nd in the country risk Index with a score of 49.0 per cent, followed by Cote d`Ivoire with a score of 48.0. With a score of 45.2, Cameroon ranked 5th below Nigeria Fitch Solutions said in a statement that a high score index meant lower risk in terms of the investment climate, adding that the Sub-Saharan Africa regional average stood at 48.3, whilst the global average is 54.1.

This means that Nigeria ranked lower than both the sub- Saharan Africa regional and global average. Analysts said this raises some concerns for investments in the country. New Telegraph had recently reported that Fitch Ratings, citing continued deterioration in government debt servicing costs and external liquidity, downgraded Nigeria’s long-term for-eign-currency Issuer Default Rating (IDR) to ‘B-‘ from ‘B,’ saying the outlook is stable. The agency stated: “Low oil production and the expensive subsidy on petrol have consumed most of the fiscal benefit of high oil prices in 2022 and will continue to stress already low government revenue levels.” It added: “If implemented, subsidy reduction in 2023 would benefit public finances, but constrained oil production and structurally low domestic non-oil revenue mobilisation will limit potential gains.”

Fitch said it expected that the implicit subsidy on petrol will cost the government approximately N5 trillion (2.4 per cent of GDP) in foregone revenue from the Nigerian National Petroleum Company in 2022, which will contribute to a widening of the general government (GG) fiscal deficit to 6.1 percent of GDP. The agency said: “The foregone revenue stems from the spread between the regulated pump price of petrol, which has averaged N190 per litre, and the import cost, which has averaged above N300 per litre. The Petroleum Industry Act 2021 contains language mandating a move to a market price for refined fuel products, but plans to phase out the subsidy in 2022 were pushed back owing to higher global oil prices. “In 2023, our base case scenario sees a gradual narrowing of the spread between the pump price and true market price of petrol, which is in line with the government’s proposed 2023 budget.

However, we expect a longer timeframe for completely phasing out the subsidy, and therefore a higher level of foregone revenue.” The agency predicted that a new administration would likely introduce a supplemental budget next year. Last month, another global credit rating agency, Moody’s Investors Service, had last downgraded Nigeria’s local currency and foreign currency long-term IDR to B3 from B2, citing “the significant deterioration in Nigeria’s government finances as well as its external position.”

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