- S&P Downgrades Nigeria’s Long Term Rating to Junk
Standard & Poor (S&P), one of the world’s top rating agencies, has downgraded Nigeria’s credit rating barely a month after lowering the nation’s outlook from stable to negative.
Nigeria’s long-term credit rating was downgraded from B to B- on Thursday. However, while the nation’s short-term credit rating remains B, the agency said it is unlikely that Africa’s largest economy will be able to mitigate the effect of low oil prices and at the same meet financial obligations with falling foreign reserves.
The nation’s foreign reserves had dipped from $45 billion in June 2019 to about $35.701 in March 2020 as Nigeria struggles to find buyers for 70 percent of its oil cargoes.
Interest rates were left unchanged by the central bank-led monetary policy committee on Monday. According to the committee, weak foreign reserves and low oil prices were the reason they left the interest rate unchanged at a period when nations are lowering interest rates to stimulate growth and sustain jobs.
While they admit the nation will struggle with growth this year, they also commend recent efforts by the central bank at managing the current situation.
Junk bonds are typically rated ‘BB’ or lower by Standard & Poor’s; B is a notch lower than BB and a speculative grade.
