Nigeria’s credit-rating outlook was cut to negative by Fitch Ratings, which cited falling oil prices and rising political risks amid tightlycontested presidential and legislative elections in Africa’s largest economy.
Fitch affirmed Nigeria’s BB- rating, three steps below investment grade. Standard & Poor’s lowered Nigeria one level to B+, four rungs below investment grade, on March 20. Voting opened on Saturday against the backdrop of a six-year insurgency waged by the Islamist militant group, Boko Haram, and was extended for a second day at about 300 of the more than 100,000 polling points where officials arrived late or equipment failed.
Fitch said in a statement: “Political uncertainty is heightened in the context of a tightly contested presidential election and potential transition issues.
“Fiscal and external buffers have been eroded significantly as Nigeria enters a period of lower oil prices.”
President Goodluck Jonathan, a Christian from the oil-rich Niger River delta, against a united opposition led by former military ruler Muhammadu Buhari, a northern Muslim who lost four years ago.
The timing of the Fitch announcement was “very interesting given that it’s right in the middle of the election, even before the results are announced,” Ridle Markus, Africa strategist at Barclays Plc’s African unit, said by phone from Johannesburg. “At the same time we do know Nigeria has a lot of challenges.”
The election is testing the stability of a country with an almost $500billion economy that’s been hit by a more than 50 per cent drop since June in prices for oil, its main export, and a weakening currency.
Nigeria, which pumped almost 2 million barrels a day last month, relies on crude for two-thirds of government revenue and 90 per cent of its export income.
Fitch delayed its decision from March 27 because of the election, it said.
Economic growth will probably be 4.8 per cent this year, half the average rate of the past 15 years, according the International Monetary Fund (IMF).
The naira has fallen 18 per cent in the past six months, the most among 24 currencies on the continent tracked by Bloomberg. Inflation will average 12.4 per cent this year, up from 8.4 per cent in February, Oyin Anubi and Turker Hamzaoglu, economists at Bank of America Merrill Lynch, said in a note on March 25.
