Rivers State and its capital Port Harcourt is home to an oil industry which is now the root cause of the nation’s attenuated risk profile, with global prices a fraction of their 2014 highs. At a basic level, refinery issues, pipeline outages caused by attacks on the industry’s infrastructure, and a financial crisis, have led to acute fuel shortages. The majority of the nation’s fuel must be imported, with the state-run Nigerian National Petroleum Corporation (NNPC) and private distributors responsible for its supply. The government is now paying outstanding bills to these private importers, but the lack of access to dollars caused by the currency crisis means imports have slowed. Many are having to obtain foreign currency on the parallel market at an inflated cost.

Distributors are moreover protesting the elimination of fuel subsidies the government declares it has no option but to address to improve the fiscal situation. At the same time the NNPC is in a particularly grave financial predicament burdening the treasury, made worse by the discovery of $16 billion worth of revenue that has apparently “gone missing” according to a financial audit; a sum disputed by the company.

Federal government debt is fortunately low, and much of it includes lending from domestic banks, with external debt equivalent to only 3% of GDP according to the IMF (excluding state guarantees). However, since Nigeria was granted a Paris Club debt write-off approximately a decade ago the state’s liabilities have been rising. Crucially the federal government remains liable for bailing out the cash-strapped states that are presently borrowing at punitive rates from domestic lenders, which is beginning to raise the flag of potential default for those most exposed and is an issue that would have huge ramifications.

For the full country risk report or information on our other risk products, please contact Michael Burke, Director of Client Relations, at (315) 431-0511, extension 311 or at mburke@prsgroup.com