Fitch Ratings has lowered the outlook on Nigeria’s long-term foreign and local currency issuer default ratings (IDRs) from stable to negative, placing it at ‘B+’.

Credit rating is usually used by sovereign wealth funds, pension funds and other investors to measure the creditworthiness of a country, therefore having a big impact on the country’s borrowing costs. This downgrade means that the cost of the country’s obtaining $1 billion at the international debt market this year may increase and investors will request for higher risk premiums (the return in excess of the risk-free rate of return an investment is expected to yield).

According to the international rating agency, the review of the outlook on Nigeria’s long-term IDRs showed tight liquidity and low oil production, which have so far driven the economy into recession. Fitch estimated a growth of -1.5% in total for the first three quarters of 2016 and expected a limited economic recovery in 2017, with growth at 1.5%, which is below the 2011 to 2015 yearly growth average of 4.8%, the Guardian reports.

It added that government’s debt increased to an estimated 17% of GDP as at the end of 2016, from the 13% recorded at end of 2015.

Anita Fatunji