- S&P Lowers Nigeria’s Credit Rating Amid Falling FX Reserves
Nigeria’s falling foreign exchange reserves due to weak oil price as prompt the international rating agency, Standard & Poor (S&P), to downgrade the nation’s credit rating from stable to ‘negative’.
“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 an e-mail statement after markets closed.
Again, while the nation’s debt remains low, “servicing costs as a percentage of government revenues are high and rising,” the company stated.
The nation’s foreign exchange reserves had weakened from $45 billion in June 2019 to $38 billion in December before plunging further to $36.7 billion in February as coronavirus dealt blow to the global commodity.
Other factors like rising inflation rate contributed to the nation’s woes as investors are wary of growing uncertainty and weak fundamental despite central bank efforts at attracting foreign investors.
Also, with the S&P rating now changed to negative, all the top three global agencies now have Nigerian sovereign credit rating as negative. A situation that could worsen the nation’s capital importation, encourage capital flight and render it’s planned euro-bond sales unattractive or with high-interest rate to lure investors.
