BUJA — MOODY’s Investors Service has assigned new credit ratings to Nigeria, Kenya and Zambia’s domestic and foreign-currency debt, citing the sub-Saharan African nations’ economic resilience and growth.
Nigeria, the region’s second-largest economy and biggest oil producer, was given a Ba3 rating, three levels below investment grade. Kenya and Zambia were both allocated a B1 rating, one step below Nigeria’s, and all three were placed on a stable outlook, Moody’s said on Wednesday. Rival agency Standard & Poor’s said separately it had raised Nigeria’s rating one level to BB-from B+.
Nigeria’s economy is expected to grow 7.1% this year, underpinned by its oil wealth, large size and the establishment of a sovereign wealth fund, according to Moody’s.
Kenya, East Africa’s biggest economy, has weathered multiple shocks and has shown resilience in recent years, while implementing sweeping governance changes under a new constitution introduced two years ago. Zambia’s rating is supported by political stability in Africa’s biggest copper producer and growth of 7.3% this year, Moody’s said.
A drop in global oil prices would "exert downward pressure" on Nigeria’s rating, while Zambia would be downgraded "in the event of a sustained drop in global copper demand and prices," said Moody’s.
The ratings company "would downgrade Kenya’s ratings should the 2013 presidential elections lead to a prolonged period of political instability."
Yields on Nigeria’s $500m of dollar bonds due in 2021, which have fallen 169 basis points this year, were little changed at 4.43% in London. Nigeria is rated BB-by Fitch.
Nigeria’s government signed the sovereign wealth fund into law in May last year with an initial $1bn. The creation of the fund will help the continent’s most populous nation of more than 160-million people establish financial buffers against weaker oil prices in the future, Moody’s said.
Nigeria’s struggle with an Islamist militant group known as Boko Haram, responsible for hundreds of deaths in the mainly Muslim north and the capital, Abuja, since 2009, poses a "moderate event risk" to the country’s rating, Moody’s said.
Borrowing costs on Zambia’s $750m of Eurobonds issued in September and maturing in 2022 were little changed at 5.31%. The southern African nation is rated B+ by S& P and BB-by Fitch.
Moody’s expects the Zambian government of President Michael Sata, elected last year, "to continue to implement prudent macroeconomic policies, with an emphasis on attracting foreign direct investment," the ratings company said.
Kenya’s rating, which compares with B+ ratings from S&P and Fitch, reflects the fact that it is diversifying its economy, investing in infrastructure and improving governance, while it also stands to benefit from recent oil discoveries, Moody’s said.
BY CHRIS KAY Bloomberg