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HomeTop NewsS&P Global Ratings revises Nigeria's outlook to stable on Tinubu's reforms

S&P Global Ratings revises Nigeria’s outlook to stable on Tinubu’s reforms

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S&P Global Ratings on Friday revised its outlook on Nigeria to stable from negative, citing the government’s recent reforms which the credit ratings agency believes could benefit the country’s growth and fiscal outcomes if delivered.

The agency also affirmed its rating for Africa’s largest economy at ‘B-/B’.

President Bola Tinubu has embarked on the country’s boldest reforms in decades, which he hopes will kick-start growth and attract foreign investors into a country that has suffered chronic dollar shortages, making it difficult for companies to thrive.

“Nigeria’s newly elected government has moved quickly to implement a series of fiscal and monetary reforms, which we believe will gradually benefit public finances and the balance of payments,” the ratings agency said in a statement on Friday.

On Monday, Tinubu said Nigeria has saved over N1 trillion ($1.32 billion) in just over two months by scrapping a popular but costly subsidy on petrol and unifying the country’s multiple exchange rates.

Tinubu’s reforms have been welcomed by investors, but unions say the reforms have led to soaring costs when inflation has been in double-digits in Nigeria since 2016, eroding savings and incomes.

READ ALSO: Nigeria launches construction of 1,350 MW gas-fired power plant to tackle energy woes

The World Bank has said it expects Nigeria could save up to 3.9 trillion naira this year alone from reforms but warned of growing short-term inflationary pressures.

S&P’s sovereign analyst Frank Gill said last month that the ratings agency was closely watching Nigeria ahead of its review on Aug. 4 and added that recent reforms were positive signs.

In February, S&P had maintained Nigeria’s credit rating at “B-/B” but changed its outlook to “negative”. Rival Fitch affirmed the West-African country at ‘B-‘ in May.

It also lowered its long- and short-term Nigeria national scale ratings to ‘ngBBB-/ngA-3’ from ‘ngBBB/ngA-2’.

S&P said its negative outlook rating for the country “reflects increasing risks to Nigeria’s debt servicing capacity over the next one-to-two years due to intensifying fiscal and external pressures”.

“The outlook revision reflects our view that Nigeria’s debt servicing capacity has weakened due to high fiscal deficits and increased external pressures. These stresses stem from low (albeit recently rising) oil production volumes, large refined-petroleum subsidy costs, high debt service expenditures, and a relatively large planned fiscal deficit in the 2023 budget,” the agency noted in a statement.

However, since he assumed power, President Bola Tinubu has introduced bold policy reforms that have attracted accolades from both the International Monetary Fund and the World Bank.

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