New Telegraph

Fitch affirms Nigeria at ‘B’; outlook stable

Fitch Ratings has affirmed Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) at ‘B’ with a stable outlook. In a statement released yesterday, the rating agency said that Nigeria’s ‘B’ rating is supported by: “The large size of the country’s economy, a low General Government (GG) debt-to-GDP ratio, small foreign-currency (FX) indebtedness of the sovereign, and a comparatively developed financial system with a deep domestic debt market.”

Conversely, it stated that the rating is, “constrained by particularly weak fiscal revenue, comparatively low governance and development indicators, high dependence on hydrocarbons and continued weak growth and high inflation.” According to Fitch, “Nigeria continues to contend with external liquidity pressures that were magnified by the 2020 pandemic-related shock and resilience to adverse external developments is weak. “Despite gradual and moderate exchange-rate depreciation over the last year, the naira remains overvalued.

“Persistent double-digit inflation under a tightly managed multiple-window exchange-rate regime could drive further misalignment of the currency relative to fundamentals. “We forecast inflation to average 16.0% in 2021 and 13.4% in 2022, driven by a number of cost-push factors.” Noting that Nigeria’s long-standing Current Account (CA) surplus shifted to a deficit of 4.2 per cent of GDP in 2019, driven by a fast rise in imports, Fitch said it is estimating a stable CA deficit of 4.2 per cent of GDP for the country in 2020, “as import compression from domestic demand contraction and restrictions on FX access offset a slump in hydrocarbon exports and remittances.”

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