Global Ratings agency, Moody’s Investors Service has kept Nigeria’s long-term foreign currency and local currency issuer ratings unchanged at Caa1 while maintaining a positive outlook same as its last review in December 2023.
The agency disclosed this in its recent report on Nigeria’s fiscal position and overall economy whilst keeping the country’s foreign currency senior unsecured debt ratings at Caa1 and the foreign currency senior unsecured MTN program rating at (P)Caa1.
According to Moody’s, the affirmation of the positive outlook is hinged on improvements in the country’s external balance, prospects of positive change in the country’s economy, clearance of the forex backlog, and the hawkish monetary stance of the CBN in the first half of the year.
However, it maintained that inflation continues to hand around as a risk to the outlook coupled with the high cost of subsidy, and reintroduction of cash support to the “most vulnerable” Nigerians.
The report stated, “Moody’s Ratings (“Moody’s”) has today affirmed the Government of Nigeria’s Caa1 long-term foreign currency and local currency issuer ratings and maintained its positive outlook. Moody’s has also affirmed Nigeria’s foreign currency senior unsecured debt ratings at Caa1 and the foreign currency senior unsecured MTN program rating at (P)Caa1.”
Furthermore, the report noted that Nigeria’s fiscal deficit is expected to rise to 7% of GDP this year. It noted that efforts of the federal government aimed at increasing tax revenue in the country are unlikely to offset current spending pressure.
More Insights
- In December last year, Moody’s raised Nigeria’s credit outlook from stable to positive on the back of President Tinubu’s reforms in the energy and foreign exchange sectors. President
- Tinubu removed the fuel subsidy as the first policy action minutes after taking the oath of office. Less than a month later, the CBN unified all segments of the forex market and stated trades would be done on a willing buyer and seller basis.
- The affirmation by Moody’s follows a similar positive outlook from other global ratings agencies like Fitch and S&P. Last month, Fitch ratings raised Nigeria’s credit outlook from stable to positive citing similar reasons as Moody’s
- Also, the Standard and Poor (S&P) in February maintained Nigeria’s credit outlook at stable citing exchange rate and inflation as challenges to the current administration.
What you should know
In May, Nigeria’s headline inflation rate rose to 33.95% helped by the perennial casualty- food and transport prices. The CBN, in a bid to tame inflation, has increased MPR by a combined 750 basis points from 18.75% to 26.25 currently. it is doubtful if the hike in MPR has had any effect has increased in for the fifth consecutive month.
(Nairametrics)
