Fitch retains Nigeria’s robust sovereign rating

To demonstrate its view that the country is on the right economic trajectory despite many challenges, Fitch Ratings has affirmed its robust ‘BB-‘ sovereign rating of Nigeria with a stable outlook. It cited several current positive features of the economy to support its position.
Special Adviser to the Coordinating Minister of the Economy and Minister of Finance, Paul C Nwabuikwu
Said such features include improving stability in the economy after the suspension of CBN Governor Sanusi Lamido Sanusi, the recent boost in the Excess Crude Account, rising oil production and improved efforts to tackle pipeline vandalism.

According to him, the issue ratings on Nigeria’s senior unsecured foreign and local currency bonds have also been affirmed at ‘BB-‘ and ‘BB’, respectively. The agency has also affirmed Nigeria’s Short-term foreign currency (Issuer Default Ratings (IDR) at ‘B’ and Country Ceiling at ‘BB-‘.
The affirmation, he added, reflects the following key rating drivers: “The foreign exchange market and international reserves are stabilising after the shock of central bank (CBN) governor Sanusi’s suspension on 20 February. Demand for FX in the official auction reverted to normal levels in March and CBN intervention in the inter-bank market has fallen away. The inter-bank naira/US dollar rate has strengthened from its lows although it remains outside the upper limit of the 155 plus or minus 3% band.

“Official reserves rose in March, helped by an increase in the ECA fiscal buffer (Excess Crude Account). Although reserves have fallen appreciably over the past year, they remain in line with ‘BB’ category peer medians at a Fitch projected 4.6 months current account payments (CXP) at end 2014, although weaker than similarly rated oil exporters (Angola and Gabon).

“On 25 March the Monetary Policy Committee continued the gradual tightening of liquidity seen over the past year, with an increase in the private sector cash reserve requirement to 15%. Inflation fell to a new low of 7.7% in February, within the target range of 6%-9%. Fitch believes that as an institution, the CBN has been strengthened in recent years and should retain its autonomy over monetary and financial policy, notwithstanding the suspension of the former governor,” he said.

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