Citing the slump in oil prices coupled with the impact of the coronavirus pandemic, one of the leading global rating agencies, Standard & Poor’s (S&P), has downgraded Nigeria’s credit rating further into junk territory with a B- rating, down from ‘B/B.’
This comes barely a month after the agency lowered Nigeria’s outlook from stable to negative. In a statement, S&P Global Ratings agency said: “We have lowered the ratings or assigned a negative outlook on some sovereigns because of their heightened risk to manage the fiscal and external shock resulting from lower (oil) prices in addition to the blow to economic growth as a result of the pandemic.”
The drop in crude oil prices also caused S&P to downgrade the credit ratings of other oil-exporting countries, such as Mexico, Angola, Ecuador and Oman. However, the downgrade did not affect Saudi Arabia and Russia. Crude oil prices have dropped more than 60 per cent this year occasioned by the oil price war between Saudi Arabia and Russia as well as the impact of the Coronavirus pandemic.
S&P said it was unlikely that Africa’s largest economy will be able to mitigate the effect of low oil prices and at the same meet financial obligations given its falling foreign reserves. Owing mainly to the sharp drop in the price of oil (the commodity accounts for over 85 per cent of Nigeria’s export earnings), the nation’s foreign reserves have fallen from $45 billion in July 2019 to about $35.70billion in March 2020. At the end of its meeting on Tuesday, the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC) left interest rates unchanged, citing weak foreign reserves and low oil prices.
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