Fitch on Nigeria’s Clearance of Outstanding Foreign Exchange Liabilities

Credit rating agency Fitch has said that the Central Bank of Nigeria (CBN) still lacks the foreign exchange to clear the backlog of demand. It noted that the country’s high-interest payment to revenue ratio weighs on its sovereign credit rating. Gaimin Nonyane, director of Middle East and Africa sovereigns with Fitch said foreign exchange shortages in Nigeria would keep pressure on the naira, where there is currently a 30% gap between the official and parallel rates. Nonyane said the CBN is short of the amount needed to clear the foreign exchange backlog and also meet the extremely large financing by private sectors. Nonyane and Toby Iles, Fitch’s head of Middle East and Africa sovereigns, also warned that Nigeria’s ratio of interest payments to revenue at above 40% – four times the median for B-rated sovereigns – was a key weakness for its credit rating. Fitch currently rates Nigeria at B- with a stable outlook. Across Africa, Iles said interest-to-revenue ratios had more than doubled since 2014 due to increased borrowing coupled with global interest rate hikes that boosted costs.

SAHARA REPORTERS