Meanwhile, the naira, Thursday strengthened for the second consecutive day, as the interbank foreign exchange rate dropped to N281.67 per dollar.
Citing increased fiscal and external vulnerability, slow fiscal and monetary adjustments and renewed insurgency in the Niger Delta, the Fitch downgrade Nigeria’s Long-term foreign currency Issuer Default Rating (IDR) to ‘B+’ from ‘BB-‘ and Long-term local currency IDR to ‘BB-‘ from ‘BB’.
In a statement issued Thursday Fitch said that, “The Outlooks are Stable. The issue ratings on Nigeria’s senior unsecured foreign-currency bonds have also been downgraded to ‘B+’ from ‘BB-‘. The Country Ceiling has been revised down to ‘B+’ from ‘BB-‘ and the Short-Term Foreign-Currency IDR affirmed at ‘B’.”
The new ratings imply that though Nigeria is presently meeting financial commitments there is a limited margin of safety and capacity for continued timely payments is contingent upon a sustained, favourable business and economic environment.
Explaining the rationale for downgrading the country’s rating, Fitch said, “Nigeria’s fiscal and external vulnerability has worsened due to a sharp fall in oil revenue and fiscal and monetary adjustments that were slow to take shape and insufficient to mitigate the impact of low global oil prices.
Renewed insurgency in the Niger Delta in 1H16 has lowered oil production, magnifying pressures on export revenues and limiting the inflow of hard currency.
Fitch forecasts Nigeria’s general government fiscal deficit to grow to 4.2 percent in 2016, after averaging 1.5 percent in 2011-15, before beginning to narrow in 2017.
“Despite expected increases in non-oil revenue, the agency expects overall general government revenue to drop to just 5.5 percent of GDP, from an average of 12 percent in 2011-15.