Global rating agency, Fitch Ratings Monday said the suspension of the Central Bank of Nigeria (CBN) Governor, Mallam Sanusi Lamido Sanusi will not significantly alter Nigeria\u2019s credit fundamentals.<\/p>\n
Fitch affirmed Nigeria\u2019s rating at \u2018BB-\u2019 with a stable outlook in October 2013. The next review on Nigeria is scheduled for April 11.<\/p>\n
According to the agency, the reaction of the financial markets to Sanusi\u2019s suspension was the first major test of \u201cthe more credible macro policy regime Sanusi established\u201d.
\nSanusi was suspended over allegations of financial recklessness by the presidency.<\/p>\n
A report by Fitch stated that if the panic and selling pressure in financial markets are sustained, it would increase inflationary pressure, making it more likely that the Monetary Policy Committee (MPC), at its next meeting, would introduce further tightening measures, including a possible rise in interest rates.<\/p>\n
\u201cThe failure of Nigeria\u2019s international reserves, including the buffer Excess Crude Account (ECA), to rise while oil prices are high has been a long-standing weakness in the sovereign credit profile.<\/p>\n
\u201cInternational reserves have been falling since last April and were $41.2 billion in the month to mid-February, equivalent to 5.6 months of gross current account payments at end-2013, but are not overly large for a country as dependent on oil revenue as Nigeria.<\/p>\n
\u201cA larger cushion would be positive for the credit profile. Progress on broader structural reforms remains mixed. The Petroleum Industry Bill (PIB), uncertainty regarding which has caused new investment to slump, remains stalled.<\/p>\n
\u201cOne of its provisions would be to break up the Nigerian National Petroleum Corporation (NNPC) and bring greater transparency to the oil sector, which would be credit positive,\u201d it said.
\nHowever, Fitch described the decision to put an additional $550 million into Nigeria\u2019s sovereign wealth fund for investment in electricity as positive, adding that the fund is too small to act as a buffer against shocks.<\/p>\n
It added: \u201cMeanwhile, electricity reforms continue, although a significant rise in production remains some way off. Agricultural reforms are also progressing.<\/p>\n
\u201cThe budget is still in the National Assembly but is being actively reviewed, despite concerns that passage would be hostage to pre-election politics (elections are due in February 2015).\u201d
\nContinuing, it said: \u201cProduction assumptions remain ambitious, however, to judge from recent outturns. The ECA balance was less than $2.5 billion.<\/p>\n
\u201cThis reduces the risk of an overly stimulative fiscal stance that would increase the debt burden, which remains low, at around 20 per cent of GDP. However, the low ECA and dwindling international reserves also mean the cushion against shocks is being depleted.\u201d<\/p>\n
Thisday<\/p>\n","protected":false},"excerpt":{"rendered":"
Global rating agency, Fitch Ratings Monday said the suspension of the Central Bank of Nigeria (CBN) Governor, Mallam Sanusi Lamido Sanusi will not significantly alter Nigeria\u2019s credit fundamentals. Fitch affirmed…<\/p>\n","protected":false},"author":1,"featured_media":23353,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","footnotes":""},"categories":[5],"tags":[],"class_list":["post-23352","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\n