Slowing progress on government reforms before the 2015 elections in Nigeria is keeping the country from getting a better credit rating, according to Fitch Ratings.
"We are clearly in a pre-election period now in Nigeria and we have seen a slowdown on the reform front," Richard Fox, Fitch's London-based head of Middle East and Africa sovereign ratings, was quoted by Bloomberg after a conference call wednesday.
"We judge Nigeria by what they achieve and some of their more ambitious plans may not come to fruition until after the election," he said.
Fitch's comments are coming a month after Moody's Investors Service said Nigeria's slow implementation of structural economic reforms was limiting its chances of a credit-rating upgrade, along with corruption, weak institutions and vulnerability to oil-price drops.
Fitch rates Nigeria at BB-, three levels below investment grade. There's "no reason" why the country isn't at investment grade, Fox said.
A proposed law to change regulation and funding of the nation's oil industry has been stalled in parliament since it was first sent to the National Assembly in 2008 and "it's anybody's guess if that's going to emerge this side of the election," Fox said.
Fiscal provisions in the Petroleum Industry Bill (PIB) seek to raise Nigeria's share of revenue to 73 per cent from 61 per cent, Petroleum Minister Diezani Alison-Madueke said in September.
Oil companies operating in Nigeria say the terms will make offshore oil exploration unprofitable.
Royal Dutch Shell, ExxonMobil, Chevron, Total and Eni SpA operate joint ventures with the Nigerian National Petroleum Corporation (NNPC) that pumps more than 90 per cent of the country's oil.
Nigeria's foreign reserves worth $48.5 billion aren't back to where they were before a 2009 banking crisis and need to improve, Fox said.
While inflation, which has stayed below 10 per cent this year, is a positive, Nigeria needs a longer track record of lower price increases, he said.
Per capita income estimated at $1,631 last year by the International Monetary Fund (IMF) "compares badly" with investment grade countries, said Fox.
Nigeria's $1 billion sovereign wealth fund, whose chief executive officer, Uche Orji, said will start investing this month, has "very little in it," according to Fox. Angola, Africa's second-largest oil producer, announced its own $5 billion fund in October.
"The fiscal situation in Nigeria is very challenging to understand," said Fox. "Nigeria struggles to implement its capital spending budget and this has been a big issue politically."
The government's 2013 budget, approved in February by President Goodluck Jonathan, set aside N1.6 trillion for capital projects, compared with N2.3 trillion for recurrent expenditure.
A state of emergency in three north-eastern states declared last month to combat increased militancy by Islamic insurgents will probably have little negative effect on Nigeria's economy, said Fox.
Jonathan imposed emergency rule in Borno, Yobe and Adamawa States on May 14 to step up the fight against militants whom he said were taking over parts of the country. Nigeria has faced worsening sectarian turmoil in the north, where the government has been battling Boko Haram since 2009.
The north "is not the economic power house of the country," said Fox. "As of today, it's not something we're thinking about too negatively."
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