The Global Credit Rating Agency on Tuesday the 7th of November in New York downgraded the Sovereign Issuer rating of the Nigerian Government to B2. Highlights of the resolution from the credit committee meeting that was convened from the 2nd November to discuss the credit status from Nigeria are:
- The authorities’ efforts to address the key structural weakness exposed by the oil price shock by broadening the non-oil revenue base have so far proven largely unsuccessful.
- As a consequence, while debt levels remain contained and notwithstanding recent cyclical improvements, the government’s balance sheet remains structurally exposed to further economic or financial shocks, with interest payments very high relative to revenues and deficits elevated despite cuts in capital spending.
Lisa Villa, a Senior Analyst says “The stable outlook reflects the fact that the likelihood of a shock occurring that would further impair Nigeria’s economic and fiscal strength remains low, with external vulnerabilities having receded supported by the rebound in oil production, the current account projected to remain in surplus, and reserves boosted through external borrowings and increased foreign capital inflows. Medium-term growth prospects are also credit supportive.
Concurrently, Moody’s has lowered the long-term foreign-currency bond ceiling to B1 from Ba3 and the long-term foreign currency deposit ceiling to B3 from B2. The long-term local-currency bond and deposit ceilings remain unchanged at Ba1.”
The downgrade comes a few weeks after President Muhammad Buhari wrote a letter to the Senate President asking for an approval to to borrow $5.5bn for the purpose of refinancing capital spending projects in a supplementary budget move for 2017 fiscal year and also meet up with maturing government bond yields commitment. The proposed debt will raise Nigeria’s external debt level to $20.54bn. The statement was released hours after President Buhari delivered its 2018 appropriation bill to a joint session of the National Assembly where he proposed an an 8.6 trillion naira budget with a 2trillion naira deficit, and a projected 4.67 trillion naira non oil tax revenues from tax.The current B2 with a stable outlook is a three step to a junk downgrade, pairing Nigeria with Angola, Uganda, Portugal.