Standard and Poor’s (S&P), an international rating agency, has revised its outlook on Nigeria from stable to negative.

The agency, however, affirmed the nation’s B-/B long- and short-term foreign and local currency sovereign credit ratings.

S&P said the new outlook reflected “increasing risks to Nigeria’s debt servicing capacity over the next one-to-two years due to intensifying fiscal and external pressures”.

It further attributed the pressures to low oil production volumes, which have recently been rising.

S&P said oil production, including condensates, averaged about 1.37 million barrels per day (mpdp) last year — a figure below the budgeted 1.6 mbpd and Nigeria’ Organisation of the Petroleum Exporting Countries’ (OPEC) production quota of 1.8 mbpd.

Other pressures, according to the agency, include large refined-petroleum subsidy costs, high debt service expenditure, and a relatively large planned fiscal deficit in the 2023 budget.

The rating agency projected that Nigeria’s economy would record an annual growth of 3.1 percent from 2023 to 2026.

“The economy is estimated to have expanded by about 2.8 percent in 2022, and we forecast real GDP to average 3.1 percent in 2023-2026,” S&P said.

“Below-capacity oil production will likely continue to affect export growth, while inflationary pressure, fiscal constraints, and sluggish investment will weigh on consumption and investment growth.

“However, after the elections, these factors are likely to be partially counterbalanced by a new, potentially more business-friendly administration.”

S&P also lowered the country’s long- and short-term national scale ratings to ‘ngBBB-/ngA-3’ from ‘ngBBB/ngA-2’.

It added that the transfer and convertibility assessment remained ‘B-‘.

Last week, Moody’s downgraded Nigeria’s credit rating from B3 to Caa1, saying the government’s fiscal and debt position was expected to keep deteriorating.

Commenting on the rating, Zainab Ahmed, minister of finance, budget and national planning, disagreed with the agency on its downgrade of the country, insisting the government was already addressing the agency’s concerns.

The Cable