Despite the assurance by the CBN Governor, Godwin Emefiele, that Nigeria’s economic woes were getting over, a global rating agency, Standard and Poor (S&P.), at the weekend downgraded the country into what it termed “junk territory in Africa”.
Thus, the S&P lowered Nigeria’s rating one level to B, five levels below investment grade, putting it in line with Kyrgyzstan and Angola, two countries that Nigeria had a leading B+ on, some three years ago.
Coming just as the country prepares to issue its first Eurobond since 2013, the agency said the mark-down was as a result of contraction in Nigeria’s oil production, a restrictive foreign exchange policy and delayed fiscal stimulus policy,
“Nigeria’s economy has weakened more than we expected, owing to a marked contraction in oil production, a restrictive foreign exchange policy and delayed fiscal stimulus,” S&P stated in its newsletter.
What is worrying officials is that the rating cut comes as Nigeria prepares to issue a dollar bond before the end of the year.
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The Debt Management Office asked banks wanting to manage a $1 billion deal to place bids by Sept. 19.
It was learnt that yields on the nation’s $500 million of securities, due in July 2023, have fallen almost 280 basis points to 6.63 percent since peaking at 9.4 percent on Jan. 18 2016.
According to Jan Dehn, head of research at Ashmore Group Plc., which manages about $53 billion of emerging market assets in Africa, “the deterioration of the Nigerian credit has been going on for years.”
He said Nigeria needs to show progress opening of its markets and letting its currency, the naira, trade freely.
Nigeria, Sub-Saharan Africa’s second largest crude producer, has seen government revenue squeezed by the fall in global oil prices to roughly half their levels from 2014. In addition, attacks claimed by militants in the oil-producing Niger Delta region have pushed monthly crude exports to the lowest in 27 years in May.
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