By Obinna Chima
IMF: Global Economy Now in Recession
One of the leading global rating agencies, Standard & Poor’s (S&P) has downgraded Nigeria’s credit rating and that of four other oil producing countries – Mexico, Angola, Ecuador and Oman – further into junk territory, with a B- rating, down from ‘B/B,’ due to the plunge in oil prices. This was a one-notch downgrade.
Under the American financial services company’s rating, the ‘B’ rating is more vulnerable than the ‘BB’ rating, even though the sovereign has the capacity to meet its financial commitments. However, adverse business, financial, or economic conditions would likely impair the country’s capacity or willingness to meet its financial commitments.
Saudi Arabia and Russia, two of the world’s biggest oil producers were not affected.
“We have lowered the ratings or assigned a negative outlook on some sovereigns because of their heightened risk to manage the fiscal and external shock resulting from lower (oil) prices in addition to the blow to economic growth as a result of the pandemic,” S&P stated.
Oil prices have plunged more than 60 per cent this year as the combination of an oil market price war between Saudi Arabia and Russia and the global coronavirus spread have caused a perfect storm.
S&P also slashed its Brent oil prices assumptions for the year to $30 a barrel as part of its move.
S&P had earlier this month, stressed that weak growth, sizable public debt and external pressure were all weighing on Nigeria’s credit worthiness.
It had noted that the country’s foreign exchange reserve levels have fallen from $45 billion at mid-year 2019 to $38 billion at end-2019 and $36.5 billion in February 2020.
IMF: Global Economy Now in Recession
The Coronavirus pandemic has driven the global economy into a downturn that will require massive funding to help developing nations, IMF Chief, Kristalina Georgieva said yesterday.
“It is clear that we have entered a recession” that will be worse than in 2009 following the global financial crisis, she said in an online press briefing.
With the worldwide economic “sudden stop,” Georgieva said the fund’s estimate “for the overall financial needs of emerging markets is $2.5 trillion.”
But she warned that “we believe this is on the lower end.”
Over 80 countries already have requested emergency aid from the International Monetary Fund.
Brent Oil Dives to $24.41 a Barrel, Lowest Since 2003
Oil prices slumped anew yesterday with Brent North Sea crude plumbing a 17-year low, owing to massive oversupply as the Coronavirus crisis paralyses global demand.
Around 1435 GMT, Brent for May delivery was down 7.33 per cent from Thursday, at $24.41 a barrel. West Texas Intermediate fell 5.97 per cent to $21.25.
Oil has tanked in recent weeks on the back of collapsing demand, as COVID-19 slams the brakes on economic activity and the world’s appetite for energy.
Crude futures spiralled even lower this month after a fierce price war erupted between Riyadh and Moscow.
“The Coronavirus pandemic is reducing oil demand,” wrote analysts at the Wood Mackenzie research consultancy in a note to clients.
“The OPEC+ production restraint agreement fell apart on 6 March and Saudi Arabia is rapidly increasing supply.
“The result: Brent crude has plunged,” they added.
Until recently, the Organization of the Petroleum Exporting Countries and Russia had cooperated closely since 2016 to curb production, support prices and protect their precious revenues.
That all changed this month when Saudi Arabia launched a price war with Moscow, after OPEC and non-member Russia failed to clinch an output-cutting deal to curb the market impact of the deadly COVID-19 outbreak.
The perfect storm has sent oil prices collapsing to their lowest levels in almost two decades, while also stretching global crude storage capacity.
“With Saudi Arabia attempting to flood the oil market by ramping up production to counter Russia, oil prices have halved this month prompting countries to stockpile under the low prices,” said Sun Global Investments head Mihir Kapadia.
“With Saudi Arabia attempting to flood the oil market by ramping up production to counter Russia, oil prices have halved this month prompting countries to stockpile under the low prices,” said Sun Global Investments head Mihir Kapadia.
