JPMorgan bond: Investors Flee As Nigeria Faces More Reduced Ratings

Barely two weeks after Nigeria was removed from the JPMorgan bond index, analysts predict that the country faces further reduced credit ratings in another two weeks.

Standard & Poor’s is expected to release a review of its assessment on September 18. It currently rates Nigeria at four levels below investment grade at B+ with a stable outlook. Fitch Ratings, which currently has Nigeria at BB-, with a negative outlook, is also expected to release a review of its rating by September 25. Both reviews are expected to be negative.

“There’s a very high risk of a downgrade,” Jan Dehn, head of research at Ashmore Group Plc, which sold all of its Nigerian Eurobonds and naira debt over the past year, told Bloomberg. “At the moment, I’m pretty far away from even considering buying anything Nigeria. It’s a deteriorating credit.”

“Fitch is the one people will be watching most closely,” Alan Cameron, an economist at Exotix Partners LLP in London, said. “The oil price has been low for a long time and people assume that’s at least a semi-permanent state of affairs, which will have a very significant impact on fiscal and external projections. It is difficult to argue that Nigeria should not be downgraded at this point.”

Financial analysts predict that these developments would result in even further capital flight and severely affect economic growth. Nigeria is currently battling a weakened currency and dwindling oil sales due to falling crude prices. Critics have also said that President Muhammadu Buhari’s delay in announcing a cabinet is further compounding an economic dilemma.

Economist and lecturer at the University of Abuja, Dr. Ben Obi, said last week that the slow pace of the new administration to tackle the headwinds facing Nigeria may further compound the country’s problems.

“I think it’s clear for all to see, the CPI is on the rise, revenue is still shaky and very recently we saw poor GDP and job creation numbers in the second quarter of the year,” he said. “When you take all these and add trade shocks and global headwinds to it, we should be taking urgent steps to curb the economy’s slump. The GDP numbers particularly are a ten year low and it is unlikely that much will change for the third or even the fourth quarter, if the nation continues at such a pace.”