Ngozi Amuche
One of the leading providers of credit ratings, Fitch Ratings, has revised outlook on Nigeria’s long-term foreign-currency Issuer Default Rating (IDR) to “stable” from “Negative” and affirmed the IDR at “B”.
According to the credit rating agency, the revision of the Outlook reflects a decrease in the level of uncertainty surrounding the impact of the global pandemic shock on the Nigerian economy.
Basically, Fitch revealed that crude oil prices have stabilised at the international market, global funding conditions have eased and domestic restrictions on movement have largely been relaxed.
It stated that Nigeria has navigated external liquidity pressures from the COVID-19 shock through partial exchange rate adjustment combined with de facto capital flow management measures and foreign-currency (FC) restrictions.
Fitch opined that the oil-rich African country supported the level of its external reserves with disbursed external official loans – lately, Nigeria got USD3.36 billion worth of loan from the International Monetary Fund (IMF) to further boost infrastructural development.
On the flip side, the credit agency’s report revealed that unfulfilled FC demand could constitute a drain on reserves once FC supply is further relaxed by CBN.
Reportedly, the stock of outstanding non-resident holdings of CBN Open-Market Operation (OMO) bills was around USD10 billion in August 2020, equivalent to 27.99 percent of external reserves (USD35.73 billion) in September 2020.
In Fitch’s view, further tightening of FC supply for trade and financial transactions could harm output growth and exacerbate inflationary pressures.
Meanwhile, September 2020 Purchasing Managers’ Index (PMI) survey report by CBN showed that manufacturing and non-manufacturing activities declined faster amid weakened new orders.