Nigeria has faulted the decision by an international ratings agency, Fitch Ratings, to lower the nation’s sovereign credit outlook to negative last Friday, giving it a BB-minus, which is about three notches below investment grade.
The agency’s sovereign ratings analyst, Veronica Kalema, had cited the depletion of the Excess Crude Account (ECA) by the federal government, decline in the country’s foreign exchange reserves at a time of high oil prices and rising oil production capacity, as well as short-term political uncertainty in the build up to next year’s elections as reasons for the revision of the outlook.
A country’s rating affects the interest that it pays on loans and bonds.
The Minister of Finance, Segun Aganga, yesterday faulted the decision to revise the country’s credit outlook, described it as “unduly punitive…given the numerous positive features of the country’s economy and ongoing reforms.
It is significant that Fitch recognises the many positive measures being taken by the current administration to address these concerns, which it describes as the ‘renewed reform momentum in 2010’”, he said, identifying the measures to include the proposed establishment of a Sovereign Wealth Fund (SWF) as well as steps to address the infrastructure deficit in the power sector.
According to Mr Aganga, some of the measures identified as crucial for Nigeria’s outlook to return to stable are already being implemented. He said that the Bill for the establishment of the Fund, for instance, is currently being drafted for accelerated passage by the National Assembly.
He also said the recovery in oil production, as a result government’s intervention through the institution of the Niger Delta amnesty programme, as well as the reforms in the banking sector, capital market and the establishment of Asset Management Corporation of Nigeria (AMCON) to revitalise the financial sector are developments which indicate that the country is on the right track.
“These actions are helping to drive another year of exceptional growth in 2010, with our economy expected to expand by 7.75 percent,” he said adding that the country’s fiscal position is stronger than those of many advanced industrial economies, placing Nigeria in the top ranks of all emerging market economies.
“The Federal Government remains committed to implementing the various reforms which are designed to strengthen the economy and ensure a strong foundation for growth, infrastructural development and job creation.”