Fitch Raises Concerns over $10bn Forex Loan, Affirms Nigeria’s Credit Rating to Stable 

Fitch Ratings has affirmed Nigeria’s long-term foreign currency credit default outlook at B- citing recent policies by President Tinubu as responsible for the stable outlook.

It also raised concerns over the proposed $10 billion forex loan which the government plans to use to offset forex backlogs and inject liquidity into the system.

This is from its latest rating outlook commentary on the Nigerian economy. The global credit ratings agency noted that reforms such as fuel subsidy removal and, the new exchange rate framework as responsible for the stable outlook.

However, it said signs of backtracking on reforms such as “a lower degree of price discovery in the FX market than in late June” and recent revelation from the nation’s apex bank which suggests that foreign reserve is significantly lower than publicly acknowledged.

Strengths and weaknesses affecting the current rating

On the strengths and weaknesses of the Nigeria economy, the agency noted “Nigeria’s ‘B-‘ rating is supported by a large economy, a developed and liquid domestic debt market, and large oil and gas reserves.

The rating is constrained by weak governance, structurally very low non-oil revenue, high hydrocarbon dependence, security challenges, high inflation, low net FX reserves, and ongoing weakness in the exchange-rate framework.”

Fitch raised concerns about the recent government announcement to secure $10 billion in foreign exchange, highlighting the absence of specific information, such as whether this amount encompasses World Bank budget support loans totalling $1.5 billion.

“We forecast a broadly flat current account surplus, averaging 0.5% of GDP in 2023-2024. There is a lack of detail on a recent government announcement to raise USD10 billion of FX, including whether this includes World Bank budget support loans of USD1.5 billion”, it stated.