Rivers Gets New Fitch Stable Outlook Rating

Corps Marshal, Federal Road Safety Commission (FRSC), Mr Boboye Oyeyemi (3rd-right), National President, Road Transport Employers Association of Nigeria (RTEAN), Alhaji Musa Isiwele (3rd-left), and other officials, after a joint news conference by FRSC and stakeholders in the transport sector in Abuja, last Monday.

International credit ratings agency, Fitch has placed Rivers State’s long-term foreign and local currency Issuer Default Ratings (IDRs) at ‘BB-’, affirming its national long-term rating at ‘AA-’ with a stable outlook.
Fitch also commended the administration of Rivers State Governor, Chibuike Amaechi for reducing the debt level of the state, while continuing with development projects and maintaining investments.
The ratings released on March 20, reflects Fitch’s expectations that Rivers State will continue to report a solid operating margin in the medium term, mainly driven by growing non-oil revenue.
“This will be partially offset by decreasing transfers received in reflection of lower oil price although the budget should continue to be balanced due to flexibility in expenditure,” Fitch said.
According to Fitch’s base case scenario, “the operating margin will stabilise at 60 per cent over the medium term (preliminary figures show 58 per cent in 2014). Internally generated revenue (IGR) is forecast to rise towards 30 per cent of total revenues and exceed N100billion by 2016, or about N8.5billion per month, up from N84billion in 2014.
“Backed by 2014 preliminary figures, IGR is expected to continue rising also due to more sophisticated collection, alleviating Rivers’ dependence on oil revenue. Fitch forecasts oil revenue would represent 65 per cent-70 per cent of annual revenue in the medium term, compared with 75 per cent-80 per cent in 2011-2013.
The report affirmed that, “The administration significantly reduced Rivers’ debt levels to N51billion in 2014, from N106billion in 2013, using the current surplus generated, asset disposal proceeds and capital transfers amounting to almost N60billion, while maintaining investments at N160billion in 2014. Nevertheless, even in a stressed scenario, debt is not expected to exceed half of the budget size, with debt service cover ratio remaining strong at below one year of the current balance, when both interest and principal repayment are considered.
“Fitch believes that debt will continue to be deployed for funding the state’s capital investment plan for the medium term. The capital expenditure is for the construction of infrastructure and service facilities such as roads, bridges, hospitals and schools, as well as in the oil and gas industry, to sustain gas supply both for the state and Nigeria.”
As part of its rating sensitivities, Fitch said it plans to monitor the outcome of the upcoming elections in Nigeria and its impact on the state’s operations.