Nigeria’s Economy Continues to Suffer as Credit Rating Falls to Junk Status

Financial services giant, Standard and Poor (S&P) on Friday, September 16 downgraded Nigeria’s credit rating to junk status.

According to Bloomberg reports, the new S&P Global Ratings lowered Nigeria’s credit ratings by one level to B, five levels below investment grade, bringing Africa’s most populous country and the second largest economy to the same level with Kyrgyzstan and Angola. The new global ratings also changed the county’s outlook from negative to stable.

Bloomberg reports that a statement released by the ratings outfit on Friday after the close of markets said that, “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,” adding that “servicing costs as a percentage of general government revenues are high and rising”.

Nigeria is currently experiencing its worst economic crises in 3 decades. In August, data released by Nigeria’s National Bureau of Statistics showed the country was in a recession after undergoing two successive quarters of negative economic growth in 2016.

The figures by the NBS showed that the Nigerian economy contracted by 2.06% in the second quarter of 2016, sliding further from a negative growth of 0.36% experienced in the first quarter of the year.

The statement from Standard and Poor however, expects the Nigerian economy to grow by 2 percent in 2017 and expand by another 4 percent in 2018.

“We believe that since passing the fiscal budget, government spending together with liberalization of the interbank foreign-exchange market may boost the economy and spur positive GDP growth next year,” the S&P statement said.

In a related development, new data from the Nigeria’s National Bureau of Statistics shows a marked decline in the amount of foreign based investment entering the country. The Punch Newspaper reports that the value of foreign investment entering Nigeria had shrunk by about $2.1 billion. The NBS data revealed that while the total foreign investment entering the country amounted to $2.75 billion in the third quarter of 2015, that amount had fallen sharply to $647.1 million at the end of June this year.