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Leading global rating agencies, Moody’s Investors Service, has released its annual credit analysis report, stating that Nigeria’s ‘B2 stable’ credit profile was constrained by the continued exposure of the sovereign balance sheet to shocks, weak institutions and elevated deficits.
It would be recalled that the agency had earlier downgraded Nigeria’s sovereign debt rating, the agency has said the country’s balance sheet remains exposed to further shocks.
To be exact, Moody’s had on November 8 downgraded Nigeria’s long-term issuer and senior unsecured debt rating to ‘B2’ from ‘B1’, even though the federal government rejected the rating.
A terse statement issued by Moody’s Investors Service, the Vice-President/Senior Credit Officer, and co-author of the report, Aurélien Mali, said, “Only a durable increase in non-oil revenue will improve Nigeria’s resilience to oil price volatility and increase the realisation rates of capital spending on the large infrastructure projects that are crucial for Nigeria’s economic development.
“Until it does, the government’s balance sheet will remain exposed to further shocks. Deficits will remain elevated and debt affordability will remain challenged.
“This exposure will persist, despite recent improvements in the economy, which are primarily cyclical and related to the strengthening of the oil sector.”
Moody’s averred that Nigeria’s economy continues to adjust to the loss of more than 50 per cent of its foreign currency earnings, saying “The continuing recovery in oil production underpins Nigeria’s more robust medium-term prospects. With a rebalanced economy, Moody’s anticipates that a further consolidation of Nigeria’s economic fundamentals will strengthen the recovery, with real growth of 3.3 per cent in 2018 and 4.5 per cent in 2019.
“Nigeria’s ranks near the bottom of many international surveys assessing institutional strength and its scores are among the weakest within Moody’s rated universe.”
“Moody’s projects a general government budget deficit of 3.6 per cent of the GDP in 2017, down from 4.7 per cent in 2016. In 2018, the deficit will decline only slightly, to 3.2 per cent of GDP, comprising a two per cent of GDP, Federal Government budget deficit and around one per cent of the GDP deficit at the state and municipality levels, as well as arrears that are likely to be split between the three levels of government.
“Nigeria’s moderate susceptibility to event risk in part reflects the waning of Niger Delta insurgency and the return of alert levels to minimum levels,” Moody’s ratings said.