Three Ratings Agencies, Now One Message

Tuesday, April 07, 2020 / 09:05 AM / FBNQuest Research / Header Image Credit: Ecographics

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1. Fitch Downgrades Nigeria to 'B'; Outlook Negative - Apr 06, 2020
2. Nigeria Long-Term Rating Lowered To ''B-'' On Weakening External Position - Mar 27, 2020
3. Moody's Announces Completion of a Periodic Review of Ratings of Nigeria - Feb 13, 2020
4. Moody's Changes Nigeria's Sovereign Ratings Outlook to Negative From Stable; Affirms The B2 Ratings - Dec 05, 2019

Fitch yesterday downgraded Nigeria's sovereign credit rating (long-term, foreign currency) by one notch from B+ to B, and maintained the negative outlook. This brings Fitch into line with S&P and is surely warranted as Nigeria faces the crashing oil price and the coronavirus pandemic with limited, and shrinking external buffers. Fitch's numbers rest upon average oil prices of US$35/b this year and US$45/b in 2021, and the CBN's "continued reluctance to adjust the exchange rate".

In the absence of a full range of forecasts, we take this last phrase to mean that the central bank will make/engineer rate adjustments in small steps, and when it has no alternative. (This has been our thinking throughout).

On this basis, Fitch has GDP contraction of -1.0% this year, a current-account deficit at 4.9% of GDP, gross reserves providing 2.5 months' cover for current-account payments (goods, services and income) at end-year and a FGN fiscal deficit equivalent to 3.1% of GDP.  These forecasts (other than growth) would place Nigeria below the median for its new peer group of B-rated sovereigns.

Fitch notes that the average oil price this year and next may fall short of its forecasts. Under its oil production expectation of 2.1mbpd, a further fall of US$10/b would equate to a widening of the current-account deficit/GDP by another 160bps.

It quotes data showing offshore holdings of OMO bills at US$14.7bn equivalent at end-December. This tallies with S&P's estimate of US$12bn in February.

Fitch has general government debt at 31% of GDP in 2020-21, and FGN debt at 26%. While this would be the highest ratio since the Paris Club restructuring of 2005 according to the agency, it would compare very favourably with the median 50% for the B-rated group.

We assume that these forecast debt/GDP ratios, in line with widespread practice, exclude net CBN claims on the FGN estimated at 4% of GDP at end-2019.

Fitch expects the government to meet most of its funding needs domestically this year, and so echoes a common feeling that the FGN would ideally have tapped the Eurobond market before the onset of the global headwinds. It acknowledges that it could secure emergency multilateral funding. The FGN has since gone down this last route with yesterday's appeal for US$6.9bn support from the Washington duo and the African Development Bank.  

The market impact of this rating action will be limited since Fitch has merely fallen into line with the two other agencies. 

Related News - Rating Agencies on Nigeria

1. Fitch Downgrades Nigeria to 'B'; Outlook Negative
2. Nigeria Long-Term Rating Lowered To ''B-'' On Weakening External Position
3. Nigeria's Outlook Revised To Negative On Falling Foreign Exchange Reserves
4. Moody's Announces Completion of a Periodic Review of Ratings of Nigeria
5. Fitch Revises Outlook on Nigeria to Negative; Affirms at 'B plus'
6. Moody's Changes Nigeria's Sovereign Ratings Outlook to Negative From Stable; Affirms The B2 Ratings
7. Fitch Affirms Nigeria at 'B plus'; Outlook Stable

Related News - Rating Agencies on Banks

1. Various Rating Actions On Nigerian Banks By S and P Following Sovereign Downgrade; Outlooks Stable
2. Nigerian Banks at Severe Risk from Oil Price Slump, Coronavirus
3. Fitch Downgrades 3 Nigerian Banks to 'B', Places All 10 Banks on Negative Watch
4. Outlooks On Six Nigerian Banks Revised To Negative After Same Action On Sovereign
5. Fitch Revises Outlook on UBA Subsidiaries to Negative on Parent Action
6. Fitch Revises Outlook on 4 Nigerian Banks to Negative on Sovereign Action
7. Moody's Affirms Bank of Industry Ratings, Changes Outlook to Negative from Stable
8. Moody's Affirms Ratings of Nigerian Banks Following Action On The Nigerian Government
9. Fitch Affirms Union Bank of Nigeria Plc at 'B-'; Outlook Stable
10. Fitch Affirms Stanbic IBTC Bank at 'AAA(nga)'
11. Fitch Affirms Zenith Bank Plc at 'B' plus; Outlook Stable
12. Fitch Affirms Bank of Industry at 'B' plus; Outlook Stable
13. Fitch Affirms United Bank for Africa PLC at 'B' plus; Outlook Stable
14. Fitch Affirms Access Bank at 'B'; Stable Outlook
15. Fitch Affirms Guaranty Trust Bank at 'B' plus; Stable Outlook
16. Fitch Revises Outlook on FBNH to Stable; Affirms at 'B-'
17. S and P Global Ratings Affirmed ETI And Ecobank Nigeria Ltd Ratings; Outlook Stable
18. Fitch Rates Access Bank's Tier 2 Subordinated Debt Final 'A(nga)'
19. Fitch Affirms Ecobank Transnational Inc at 'B'; Outlook Stable
20. Access Bank 'B and B' Ratings Affirmed; Outlook Stable

Related News - Rating Agencies on Selected Companies and Notes

1. Moody's Assigns Ratings to Dangote Cement Plc's DMTN Program and Proposed Series 1 Notes
2. Rating Actions Taken On Several Corporate Issuers With Exposure To Nigeria
3. Fitch Affirms Bharti Airtel at ''BBB-''; Off Watch Negative; Outlook Stable
4. Fitch Revises IHS's Outlook to Negative; Affirms at 'B plus'
5. Moody's Affirms Interswitch's Ratings; Outlook Remains Stable
6. Moody Changes Ratings for IHS, Seplat and DANGCEM Following Negative Rating on Sovereign Outlook
7. Moody's Assigns B2 Corporate Family Rating To Interswitch Limited; Outlook Stable