Nigeria in the “red”, says Trading Economics

A prominent international rating agency, Trading Eco­nomics (TE), has rated Nigeria’s economy as “negative” (in red), on 27 points, indicating that the nation currently possesses a highly speculative economy.

The Trading Economics credit rating takes into account the average grade given by interna­tional credit rating agencies plus multiple economic indicators, ex­change rates, government bond yields, stock indexes, commodity prices and very little discretion.

According to TE, its result is based on Standard & Poor’s credit rating of Nigeria at BB- (Nega­tive to be watched also in red). Moody’s rating for Nigeria at Ba3 (Stable) and Fitch’s credit rating for Nigeria at BB- (Stable) com­bined data from the country’s financial markets and economic indicators.

According to the regional man­ager, Standard and Poor (S & P) Konrad Reuss, Nigeria was rated based on its six main categories and it was found to be weak in three classifications: institution­al and governance effectiveness, economic structure and growth, fiscal flexibility and performance.

According to Reuss, the factors putting the Nigerian economy in danger include the Boko Haram insurgency, the fall in oil prices (because of the importance of oil for government and export reve­nues), as well as the forthcoming elections. Nigeria was classified as neutral in external liquidity, international investment posi­tion and monetary flexibility, while its only area of strength was in its debt burden.

In general, a credit rating is used by sovereign wealth funds, pension funds and other inves­tors to gauge the credit worthi­ness of a country; and it has a big impact on the country’s borrow­ing costs.

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Ihesiulo Grace

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