13 Sep


Fitch Ratings is a leading provider of credit ratings, commentary and research, dedicated to providing value beyond the rating through independent and prospective credit opinions. It offers global perspectives shaped by strong local market experience and credit market expertise.

The additional context, perspective and insights it provides has helped investors fund century of growth and make important credit judgements with confidence. Fitch ratings Inc. is one of the three Nationally Recognised Statistical Rating Organisations (NRSRO) designated by the U.S. Securities and Exchange Commission in 1975, together with Moody’s and Standard and Poor’s, and the three are commonly known as the “Big Three credit rating agencies”.

The organisation is dual-headquartered in New York and London. Hearst previously owned 40% stake in it and later increased it to 50% on April 12, 2012.

Fitch ratings and Fitch solutions are part of the Fitch group. It is a jointly owned subsidiary of Hearst Corporation and FIMALAC SA.

Fitch ratings is the smallest of the “big three” NRSROs, covering a more limited share of the market than S&P and Moody’s, though it has grown with acquisitions and frequently positions itself as a “tie-breaker” when the other two agencies have ratings similar, but not equal in scale.

The ratings can be categorised into long term credit ratings and short term credit ratings. The long term credit ratings are assigned on as alphabetic scale from ‘AAA’ to ‘D’, first introduced in 1924 and later adopted and licensed by S & P.

Like S & P, Fitch also uses intermediate +/- modifiers for each category between AA and CCC (e.g., AA+, AA, AA-, AA+, A, A-, BBB+, BBB, BBB- etc).

The long term credit ratings can be classified into Investment grade and Non-Investment grade. Under Investment grade, we have AAA: the best quality companies, reliable and stable.

AA: quality companies, a bit higher risk than AAA.

A: economies situation can affect finance

BBB: medium class companies, which are satisfactory at the moment

As for Non-Investment grade, we have :

BB: more prone to changes in the economy

B: financial situation varies noticeably

CCC: currently vulnerable and dependent on favourable economic situations to meet its commitments

CC: highly vulnerable, very speculative bonds

C: highly vulnerable, perhaps in bankruptcy or in arrears but still continuing to pay out on obligations

D: has defaulted on obligations and Fitch believes that it will generally default on most or all obligations.

NR: not publicly rated

Fitch’s short-term ratings indicate the potential level of default within a 12-month period.

  • F1+: best quality grade, indicating exceptionally strong capacity of obligor to meet its financial commitment.
  • F1: best quality grade, indicating strong capacity of obligor to meet its financial commitment.
  • F2: good quality grade with satisfactory capacity of obligor to meet its financial commitment.
  • F3: fair quality grade with adequate capacity of obligor to meet its financial commitment but near term adverse conditions could impact the obligor’s commitments.
  • B: of speculative nature and obligor has minimal capacity to meet its commitment and vulnerability to short term adverse changes in financial and economic conditions.
  • C: possibility of default is high and the financial commitment of the obligor are dependent upon sustained, favourable business and economic conditions.
  • D: the obligor is in default as it has failed on its financial commitments.

Fitch Ratings has once again, affirmed Nigeria’s BB- rating and a stable outlook for the economy. The rating was recently announced and supported by Standard and Poor to affirm a strong and positive rating for Nigeria’s economy with BB-

The organisation retained Nigeria’s long-term foreign and local currency, International Depository Receipts (IDRs) and Senior unsecured bond ratings at ‘BB-‘ and ‘BB’ respectively.

With GDP at the region of 6 and 7 percent and single digit inflation rate, Fitch refers to Nigeria economic outlook as stable with very strong macro-economic index. The stable outlook reflects the fact that the Fitch’s view, upside and downside risks are well balanced.

Fitch view during reformed programmes has been mixed results. Output seem to be on a rising trend, although it has been affected by gas pipeline damage and an impact on GDP growth is hard to discern.

Agricultural reforms also gained traction. The most obvious benefit to the economy has been a fall in imports due to reduced oil subsidy payments, crackdown on fraud in oil subsidy system and substitution in the agricultural sector.

Nigeria’s ratings remained constrained by weak governance, low per capita income and vulnerability to oil price volatility and that data weaknesses hamper the monitoring of economic and fiscal performance and reform progress. However, the rating organisation is aware of the security challenges but acknowledged that government is responding with security measures.

Failure on the part of National Assembly to pass PIB makes the reform in that sector a continual struggle according to the rating agency.

However, despite all these challenges, the economy was resilient which was a reflection of the resilient Nigerians said the coordinating minister for the economy and minister of Finance, Dr. Okonjo Eweala

Inflation has been single digit and public finances comfortable. Fitch estimates a general government deficit of around 1.8% of GDP. Both oil and non-oil revenues are under-budget and the Excess Crude Account (ECA) has been tapped to compensate for shortfall and Capital spending remains under budget.

The agency said sovereign and overall external balance sheet, current account surplus, debt service ratio and external liquidity are all stronger than ‘BB’ category medians.

Foreign reserves rose steadily in early 2013 but have been falling since due to reduced oil output prompting ECA drawdown and global market turbulence.

It must be realised that what is important about ratings is that while acknowledging all challenges the economy faces, it points to and applauds the strengths such as progress in power sector, increased focus on agriculture, strong investment in local manufacturing and other areas. There is need to do more to improve our ratings.


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