The Benue State investment environment has received a boost with an ‘Outlook Stable’ rating by Fitch Ratings, an international credit rating agency.
Fitch Ratings in its latest rating released on the 30th of January, 2024 assigned Benue State a ‘B-‘ (B-Negative) Long-Term Issuer Default Rating (IDR) and a ‘A-(nga)’ National Long-Term Rating. Both Outlooks are Stable. Fitch also accessed Benue’s Standalone Credit Profile (SCP) is assessed at ‘b’ negative. (Fitch Rates Benue State ‘B-‘; Outlook Stable (fitchratings.com))
This rating reflects Fitch’s assessment of the state’s ability to support long-term credit lines and highlights its ability to meet its financial obligations.
Fitch Ratings is an international credit rating agency based in New York City and London. Investors use the company’s ratings to determine which investments are less likely to default and yield a solid return.
Details of the rating hosted on Fitch Ratings website indicated Benue state can further grow its revenue streams from internally generated revenue, agriculture investments, and federal government allocations. However, Fitch acknowledges the vulnerability that comes from dependence on oil revenue funding and underscores the weakness of the Benue economy; ‘s heavy reliance on oil revenues from the FG.
Experts say the ‘B-‘ rating, despite being below investment grade, offers numerous benefits and opportunities for Benue State, potential investors, and the Nigerian economy as a whole. This rating indicates an acceptable level of creditworthiness, which can be vital in attracting investments, encouraging economic development, and building sustainable partnerships.
Benue State is opening new investment opportunities in the agriculture value chain, solid minerals, MSMEs, transportation, and energy.
“Over 80% of Benue’s revenue is made up of federal allocated revenue, ie. the VAT and statutory transfers (the latter over half of operating revenue) that are highly dependent on the sale of hydrocarbons. Internally generated revenue (IGR) at less than 20% of total operating revenue is below the Nigerian state’s average.
We forecast oil-related transfers to peak in 2023-2024 on a higher naira exchange rate against the dollar offsetting the volatility of oil prices. We expect them to normalise in the medium term at around 2022’s NGN50 billion under assumed oil prices of below USD50 per barrel” the report indicated.
Fitch further indicated that “Benue’s revenue potential depends on the state’s ability to broaden its tax base and enforce tax compliance. The main fiscal revenue is pay-as-you-earn taxes, on which Benue cannot set the tax rate. Other IGR sources, including fees, are marginal for Benue and could offer some room for increase. However, Fitch views the ability to expand the tax base as being limited by Benue’s large informal economy that is widely based on agricultural activities, and the low income of its population.”
Commenting on the report, Dr. Raymond Asemakaha, the Managing Director/CEO, Benue Investment and Property Company Ltd (BIPC) “for Benue State, this Fitch rating will facilitate access to global capital markets, allowing us to secure funding for infrastructure projects, social welfare initiatives, and other developmental programs. It will promote investor confidence and bolster our efforts to diversify the economy, create jobs, and improve our citizens’ living standards.”
Furthermore, “this rating serves as a clear sign of the state’s prudent financial management, fiscal discipline, and transparency, which are essential elements for any entity seeking to attract investments. As we continue to prioritize sustainable economic growth, this rating reassures potential investors of our commitment to a favorable investment environment.”
“On a broader scale, a positive rating for Benue State reflects positively on Nigeria’s overall investment climate. It demonstrates the potential and opportunities that exist within the nation, highlighting the government’s commitment to economic stability and development across all levels – federal, state, and local” Dr. Asemekaha further stated.
He said “Benue State acknowledges the trust bestowed upon us by Fitch Ratings and pledges to build upon this rating as we strive for continuous improvement. We remain committed to attracting domestic and international investors, fostering public-private partnerships, and creating an enabling environment for economic growth, job creation, and poverty reduction.”
Moving forward he further stated that the “Benue State stands ready to explore new possibilities, implement progressive policies, and work hand-in-hand with our stakeholders to maximize the advantages offered by this Fitch rating. We welcome investors, partners, and individuals who share our vision of a prosperous and inclusive Benue State and Nigeria.”