S&P affirms Nigeria ratings at ‘B’ on benign oil outlook

S&P Global Ratings has affirmed its B (Outlook: Stable) long- and short-term sovereign credit ratings on Nigeria, which it tips to grow 1.5 percent in 2017.  

“After recession in 2016, we expect that increasing oil production and government capital expenditures will support Nigeria’s economic growth rates and export revenues over 2017-2020,” S& P said Friday, March 17.

“We are affirming our ratings on Nigeria at ‘B/B’. The stable outlook balances our assessment that the oil sector improvements will support economic growth, although external financing pressures remain.

The global ratings agency had lowered Nigeria’s rating one level to B last September, five levels below investment grade and in line with Kyrgyzstan and Angola. The outlook was changed from negative to stable at the time.

The rating comes as Nigeria weighs options of returning to the international debt market to raise $500 million, following the sale of a $1 billion Eurobond which was approximately 8 times oversubscribed, with orders in excess of US$7.8 billion at an interest rate of 7.8 percent.

“We expect Nigeria’s economy to achieve real GDP growth of 1.5% in 2017 and 3.4% on average over 2017-2020, supported by improvements in the oil sector and improved government budget execution under its recently released Economic Recovery and Growth Plan 2017-2020,” S&P noted.

It further estimates the country’s overall current account deficit at below 2% of GDP in 2016, compared with a previous forecast of 3.4% in September 2016, on the back of crude production and prices gain.

Nigeria is reeling from its worst economic crisis in 25 years, after low oil prices and severe shortages of foreign exchange crimped growth.

However, oil prices have trended upwards since OPEC members, excluding Nigeria and Libya, agreed to a production cut of 1.2 million barrels daily which was implemented in January 2017.

Brent crude prices inched up 0.02 percent on Friday to $51.75 per barrel, according to Bloomberg data.