Moses Obajemu
15 August 2008
Lagos — Standard and Poor's Rating Services(S&P), has launched a national credit rating scale for the Federal Republic of Nigeria (BB-/Stable/B local currency; BB-/Stable/B foreign currency), in a new initiative to support the growth and transparency of the domestic bond market.
The move will also improve availability of long-term funding for the public and emerging private sector.
S&P said in a statement yesterday, that the Nigeria national scale was designed to appeal to a wide range of companies and institutions seeking to raise capital in Africa's most populous state, as it enables the firm to offer a much finer distinction in the credit quality of local debt issuers than is allowed by its global ratings scale.
It said it will provide issuers, counterparties, intermediaries, and investors in the country's financial markets with both debt ratings, which apply to a specific debt instrument, and issuer credit ratings, which apply to a specific obligor.
"High global oil prices, strong macro-economic growth, and increased involvement by international investors in the country's maturing financial markets have created a boom period for Nigeria, already firmly established as the financial hub of West Africa," said Konrad Reuss, Standard & Poor's Managing Director, South & Sub-Saharan Africa.
He said, "although the Nigerian domestic debt market is still relatively small by international standards, private sector interest in naira-denominated assets is rising. Standard & Poor's believes the market will grow rapidly in the coming years, as local and the Federal Governments, banks, and infrastructure projects seek to fund long-term projects."
Recognising the importance of developing the domestic Nigerian bond market on the African continent, the African Development Bank issued its first Nigerian naira bond in 2007, with Naira-denominated bond market capitalisation reaching approximately $US45 billion by the beginning of 2007. The Pension Reform Act of 2004 has also been instrumental in creating a local investor base that is now looking to credit ratings to provide an objective and rigorous assessment of credit quality.
"Standard & Poor's new Nigerian national scale is a unique instrument for measuring the credit risk associated with issuers and debt instruments operating in the Nigerian market, launched in response to specific demand from local market participants," said Rob Richards, Standard & Poor's Managing Director.
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