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Fitch Revises Nigeria’s Outlook To Stable, Affirms Rating At ‘B+’

Fitch Ratings has revised Nigeria’s Long-Term Foreign-Currency Issuer Default Rating (IDR) Outlook to Stable from Negative and affirmed the rating at ‘B+’.

The latest revision of the nation’s Long-Term IDRs Outlook indicates the ongoing economic recovery programmes and decreasing external vulnerabilities, complemented by the increased oil production and higher global oil prices are impacting positively on the nation’s economy.

The revision of Nigeria’s Outlook is coming on the heels of recent but sustained economic recovery from the recession that ended in early 2017.

An analysis if the recent performance of the Nigerian economy, particularly since mid 2017 showed that non-oil growth has been sustained through deliberate foreign exchange support by the monetary authorities, amongst other measures.

This is even as the oil sector’s contribution to the GDP has been positive since the first quarter of 2018 as oil production ranged just below 2.1 million barrels per day (mbpd) as against the 1.9 mbpd recorded in 2017. Fitch projected that the average production would be sustained at about the 2.1 mbpd through 2018 and 1H19.

According to the rating agency, Nigeria’s  GDP growth is projected at 2.0% overall in 2018, increasing to 2.5% in 2019 and 3.3% in 2020. It forecasts further that the nation’s medium-term growth will average around 4.0%.

In addition, Fitch forecasts that Nigeria’s oil production will increase on the prospect of new exploration and oil infrastructure projects coming on stream, noting however that the country will struggle to raise production to the target proposed in the 2019-2021 Medium Term Expenditure Framework (MTEF).

While high inflation in any economy constitutes a rating weakness, Fitch expects that Nigeria’s annual average inflation will fall, but still remain in the double digits through 2019. Despite the projected dip in inflation rate, the agency expects that the Central Bank of Nigeria (CBN) will move towards tighter monetary policy to support FX rate stability.

Despite the improvements in Nigeria’s foreign currency availability to meet demands, Fitch believes that it remains a constraint on economic growth as the apex bank continues to operate an FX regime with multiple windows and exchange rates, a monetary strategy it believes will not change before the 2019 general elections.

Fitch’s rating of Nigeria’s ‘B+’ IDRs indicate the country’s position as Africa’s largest economy and its well-developed domestic debt markets, balanced against low levels of domestic revenue mobilisation and of GDP per capita, a high level of oil and gas dependence, and low rankings on governance and business environment indicators.

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