S&P downgrades Nigeria further into junk status

S&P Global Ratings has downgraded Nigeria, Africa’s most populous nation, further into junk territory, taking the country’s rating one level to B, five levels below investment grade (in line with Kyrgyzstan and Angola), and changing the outlook from negative to stable. S&P said in a statement:

"Nigeria's economy has weakened more than we expected owing to a marked contraction in oil production, a restrictive foreign exchange policy and delayed fiscal stimulus."

The ratings agency added that while government debt remains low, "servicing costs as a percentage of general government revenues are high and rising".

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The downgrade, which comes just as Nigeria prepares to issue its first Eurobond in three years, is the latest blow to the economy, which shrank in the last two quarters and which, according to the IMF, is headed for its first full-year recession since 1991. S&P said in its statement that it expects Nigeria's economy to contract 1% this year before returning to growth, and that real GDP is likely to expand 2% in 2017 and 4% in 2018.

"We believe that since passing the fiscal budget, government spending together with liberalisation of the interbank foreign-exchange market, may boost the economy and spur positive GDP growth next year," S&P said.

Moody's Investors Service and Fitch Ratings Ltd. both downgraded Nigeria to four levels below investment grade in the first half of this year.