Fitch sees low debt aiding Angola, Nigeria through oil

Africa’s biggest oil producers have debt levels low enough to withstand slumping crude prices, while Ghana faces risks without an aid package and Zambia from an unexpected election, Fitch Ratings Ltd. said.

Nigeria and Angola are able to post budget deficits for the next year or two because of their low debt, enabling them to maintain spending with lower oil prices, said Carmen Altenkirch, director of the sovereign group at the agency. That space may narrow after a few years, she said.

“Nigeria and Angola have the fiscal space to run deficits in the region of 4-5 percent of GDP for a few years without undermining fiscal stability,” she said in an interview in Cape Town on Thursday. “However, if oil prices remain lower for longer, fiscal policy may need to be tightened to avoid downward pressure on the rating.”

Slumping crude prices pushed the naira to a record low this week, prompting pledges from central bank officials that they’ll continue using foreign-exchange reserves to bolster the currency. Angola cut its estimate November 12 for 2015 oil output to 1.83 million barrels a day from 2 million. Fitch rates Nigeria and Angola BB-, three steps below investment grade.

“Creditworthiness would benefit from running fiscal surpluses,” Altenkirch said. “Fiscal surpluses during the good years will give these countries scope to run deficits due to lower oil prices.”Ghana and Zambia could be rated at similar levels to Nigeria, Angola and Gabon, which also pumps oil, if their economies were more stable, she said.”