Fitch Ratings has affirmed Nigeria’s Long-term foreign and local currency IDRs and senior unsecured bond ratings at ‘BB-’ and ‘BB’ respectively. The Outlook is Stable. The agency has also affirmed Nigeria’s Short-term foreign currency IDR at ‘B’ and Country Ceiling at ‘BB-’. KEY RATING DRIVERS
The affirmation reflects the following key rating drivers: GDP growth slowed to 6.4% in H113 but has shown resilience in the face of exogenous shocks: severe floods in 2012 which hit agricultural output; security problems especially in the north earlier this year; and increased oil theft and vandalism and the consequent repair shutdowns which have caused oil output to contract for the second year in a row. The non-oil economy has slowed but still grew by 7.9% in 2012 and 7.6% in H113.
Non-oil growth should pick-up in H213 as normal weather has resumed and the authorities have responded to security problems, Reuters reports.
Reforms to the electricity and agriculture sectors could start to boost potential growth. Inflation has been in single digits all year – the lowest in five years and the longest stretch of single digit inflation since 2008. Policy rates are unchanged. The central bank (CBN) has the twin aims of achieving single-digit inflation and maintaining exchange rate stability.
Public finances remain comfortable. Fitch estimates a general government deficit of around 1.8% of GDP this year and next.
Both oil and non-oil revenues are under-budget and the Excess Crude Account (ECA) has been tapped to compensate.
Capital spending also remains under budget. The draft 2014 budget plans ambitious fiscal consolidation, with lower oil production and benchmark oil prices and lower spending than the 2013 budget. However, Fitch expects that oil production will likely fall short again, and the final budget that emerges from the National Assembly (NA) is likely to be more expansionary. Nevertheless, Fitch expects general government debt to …