Standard & Poors Ratings Services on Thursday revised its outlook on Nigeria to positive from stable.The rating agency also affirmed the B+/B long- and short-term issuer credit ratings and the ngA+/ngA-1 long- and short-term Nigeria national scale ratings, while the transfer and convertibility assessment was unchanged at B+.According to a statement by the agency, the outlook revision indicates that there is at least a one-in-three likelihood of an upgrade if Nigerias reform initiatives support economic growth, build stronger buffers against Nigerias dependence on petroleum revenue and reduce pressure on the exchange rate.On why the rating agency reviewed the rating, it said, "After national elections in May 2011 and strong Gross Domestic Product growth rates over the past few years, Nigeria has tightened its fiscal and monetary stance by reducing projected fiscal deficits and by raising its monetary policy rate. It plans to cut a fuel subsidy, which we understand has been paid from the Excess Crude Account in the past."This is one of several important reform initiatives President Goodluck Jonathan has promoted since he succeeded the late President Umaru YarAdua in February 2010. Over the past two years, the authorities have also strengthened the banking sector. The government furthermore aims to improve predictability and transparency in the oil sector by drafting and passing the Petroleum Industry Bill, and plans an overhaul of the countrys electricity sector that should reduce power supply constraints."According to the agency, the ratings on Nigeria are constrained by the countrys internal political tensions, weak political institutions, and faltering efforts to institute buffers that will allow countercyclical policy options.It also said the country had a low level of development and significant infrastructure shortfalls."Inconsistencies in reported external data also constrain the ratings. The ratings are supported, however, by low fiscal and external debt burdens, owing to debt write-offs in 2005 and 2006 and high petroleum prices supporting exports and government revenues in recent years," it added.Gross general government debt has slightly increased in recent years to an expected still-low 16 per cent of GDP at year-end 2011. Net debt has remained below six per cent of GDP. With the governments fiscal consolidation plans and high nominal GDP growth rates, it is expected that fiscal debt ratios will somewhat decrease again over the next few years.The agency pointed out that a potential upgrade would also be predicated upon no worsening of the political tensions between the Islamic north and Christian south and no significant deterioration in the countrys fairly weak performance on international corruption and ease-of-doing-business measures.It said, "Alternatively, we can revise the outlook to stable if fiscal and external balances fail to improve. This can be, for instance, as a consequence of a sharp drop in oil production or prices, or if political tensions or violence increase substantially, affecting overall political stability in the country."
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