S&P cuts Nigeria credit rating due to oil production drop

Ratings agency Standard & Poor’s cuts Nigeria’s credit rating on Friday, saying the drop in oil production and a restrictive foreign exchange regime was hurting its economic prospects.

In making the downgrade to ‘B/B’, S&P said that Nigeria’s delay in passing an expansionary budget along with taking on more debt had increased its credit risk.

Highlighting “steep increases” in the debt servicing ratio, S&P warned that the country had to focus on improving its non-oil revenue.

But it said that if Nigeria was able to respond to its economic crisis with sound policies — including anti-corruption measures that “materially” boosted non-oil revenues — the economy could return to higher growth by 2018.

The downgrade came on the same day that Nigerian President Muhammadu Buhari’s government announced its plan to raise $1 billion on the Eurobond market this year.

Nigeria officially announced it was in recession in August, but with double-digit inflation hitting consumers and businesses complaining they are unable to get dollars, signs of the downtown were obvious months ago.

Ongoing attacks by rebels in the oil-producing swampland of the Niger Delta has compounded the pain of low crude prices, while banks have been hit by currency curbs.

“The oil sector narrowed the most in the second quarter, falling by close to 20 per cent year-on-year following intensified pipeline vandalism in the Niger delta,” S&P said.

Nigeria has moved more slowly than expected on implementing an expansionary 6.1-trillion-naira ($19.4-billion) budget hampering a quick economic rebound, the ratings agency said.

The country of 170 million people relies on oil and gas for the bulk of its exports and around 70 per cent of its revenue after years of chronic under-investment and neglect that has caused other industries to wither.