Nigeria needs to solve an acute shortage of foreign currency that is slowing economic growth if Africa’s most-populous country wants to improve its sovereign rating after being downgraded deeper into junk last week, Fitch Ratings said.
The firm downgraded Nigeria by one level to B-, six notches above default and on par with Ecuador and Angola, citing government debt-service costs, worsening external liquidity, low oil production and the expensive subsidy on imported gasoline.
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“Our view is that steps to ease foreign-currency liquidity and increase the credibility of the foreign exchange market” will help trigger the conditions that will “be a positive for the sovereign rating,” Jermaine Leonard, director at Fitch, said in an emailed response to questions. Such a move “would be supportive of improved macro stability, higher non-oil growth and lower vulnerability to external shocks.” [Bloomberg]
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