The negative outlook shows the pressures on Nigeria’s external finances after the recent fall in oil prices and the current COVID-19 pandemic.

Fitch said this downgrade will raise the government’s debt and interest payment-to-revenue ratios from the already high levels and lead to a renewed economic recession.

A statement from Fitch said “The plunge in international oil prices, which we assume will average of $35/barrel in 2020 after $64.1/barrel in 2019, highlights Nigeria’s high dependence on the oil sector, with hydrocarbon revenues representing 57 percent of current-account receipts and nearly half of fiscal revenue over the last three years. This shock exacerbates the overvaluation of the naira and remedial policy actions taken by the Central Bank of Nigeria will not suffice to address deteriorating external imbalances, in our view.”

“The CBN allowed the exchange rate on the Investor and Exporter Window, on which the bulk of foreign-currency transactions are held, to depreciate by 6.7 percent since mid-January and devalued the official exchange rate by 15 percent in March.”

It also said, “Continued pressures on the naira are illustrated by the drawdown in international reserves, which declined by 9.4 percent year-to-date, representing a cumulative fall of 22.5 percent since their peak mid-July.”