Fitch revises Nigeria’s outlook to stable, says challenges remain

A global credit rating agency, Fitch Ratings, said it had revised Nigeria’s outlook to stable from negative.

It said in a statement on Tuesday that the recovery of sub-Saharan African countries from the pandemic shock last year was underway, but it was slowed by the weak state of public finances.

The rating agency said the slow pace of COVID-19 vaccination programmes meant that risks related to the pandemic also remained high.

Median GDP for sub-Saharan Africa sovereigns rated by Fitch fell 2.6 percent in 2020, a more moderate decline than in any other major region, according to a statement.

It said, “Recovery will bring median growth to 4.3 percent in 2021 and five percent in 2022, which is fairly modest considering the boost from the base effect, as growth is held back by challenging public finances. Median public debt in the region leapt to 68 percent of GDP in 2020 from 56 percent in 2019, and is likely to rise further to 75 percent in 2022.

“Many SSA sovereigns will achieve ‘herd immunity’ only in late 2022 at the earliest, raising the risk of new and potentially more severe infections waves, although the impact on sovereigns could be softened by containment measures becoming more targeted.”

Fitch said very supportive global financial conditions had mitigated the pandemic shock but gradually less supportive global financial conditions could lead to greater volatility complicating SSA market access.

“The region also benefits from global support initiatives, like a new Special Drawing Right allocation and the G20 Common Framework, although a restructuring of debt to the private sector under the CF would likely qualify as a distressed debt exchange,” it added.

According to the statement, there were 12 downgrades of SSA sovereigns since April 2020, partly triggered by the pandemic.

“Challenges remain, as indicated by five SSA sovereigns on Negative Outlook (no Outlooks assigned at ‘CCC’ or below), but Fitch has revised the Outlooks on the ratings for Cameroon and Nigeria to Stable from Negative and the Outlook on Benin and Cote d’Ivoire is Positive,” it said.