Nigeria Creditworthiness Remains Highly Speculative – Notes
Nigeria’s creditworthiness remains highly speculative, according to a recent rating from S&P which affirmed the nation’s long and short-term foreign and local currency sovereign credit ratings at “B-/B” with a stable outlook.
Interpreting the ratings, Cedrus Group Africa said this means that S&P views Nigeria’s creditworthiness as “highly speculative” with a significant risk of default, but the outlook suggests that they don’t anticipate the rating changing soon.
Surprisingly, trading activities in the local bond market continue to stay on a positive track with solid buying momentum on record after a large raise in treasury bills pricing by the monetary authority last week.
In the secondary market, a total of 52,338 units of bonds valued at N51.123 million were traded this week in 31 deals compared with a total of 98,426 units valued at N95.304 million transacted last week in 60 deals, Cedrus Group Africa said in a note.
Explaining the ratings, Cordros Capital Limited said S&P Global rating decision reflects confidence in the government’s ability to sustain its reform agenda.
According to the investment firm, the reform is expected to bolster economic growth and fiscal outcomes, despite challenges such as below-potential oil production, risks to macroeconomic stability and confidence stemming from inflationary pressures and currency volatility.
In the rating note, S&P Global cautioned that the current rating could be lowered over the next 12 months if certain risks materialise.
The risks include a slide in the government’s capacity to meet commercial obligations, a reduction in usable foreign exchange reserves, significantly higher fiscal deficits or debt-servicing needs, and a lack of willingness of domestic financial markets to absorb additional local currency debt issuance.
“Our medium-term expectation is for Nigeria’s credit ratings to improve further given the present administration’s reforms. However, we highlight the strong risk of policy backtracking, considering the socio-economic challenges involved in reform implementation, which could trigger downgrades on the current outlook”, said Cordros Capital in a note. #Nigeria Creditworthiness Remains Highly Speculative – Notes#
High Cost: Table, and Sachet Water Producers Close Shop in Enugu
