Nigerian economy still in the woods – Moody’s



Nigerian economy still in the woods – Moody’s


By Nsikan Ikpe


A recent review of its periodic ratings on Nigeria by the rating agency, Moody’s Investors Service has come out with a ‘still in the woods’ verdict, The Difference has learnt.

This view substantially tallies with that of the fiscal and monetary authorities in Nigeria as well as those from organisations like the World Bank, the International Monetary Fund and the African Development Bank, AfDB.

Moody’s ‘reviews all of its ratings periodically in accordance with regulations – either annually or, in the case of governments and certain EU-based supranational organisations, semi-annually.’

According to a briefing note from the agency, this periodic review is however ‘unrelated to the requirement to specify calendar dates on which EU and certain other sovereign and sub-sovereign rating actions may take place.’

The note further explains that ‘Moody’s conducts these periodic reviews through portfolio reviews in which Moody’s reassesses the appropriateness of each outstanding rating in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers.’

And in line with the increasing need for fuller public disclosure, ‘since 1st January 2019, Moody’s issues a press release following each periodic review announcing its completion.’

In the recent instance, the statement disclosed that ‘Moody’s has now completed the periodic review of a group of issuers that includes Nigeria and may include related ratings. The review did not involve a rating committee, and this publication does not announce a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future; credit ratings and/or outlook status cannot be changed in a portfolio review and hence are not impacted by this announcement.’

Shedding more direct light on its findings, the statement then went on to outline that ‘the credit profile of Nigeria (issuer rating B2) reflects “ba2” economic strength, supported by the country’s substantial oil and gas endowment and long-term growth prospects, though constrained by very low GDP per capita; “caa3” institutions and governance strength, with very weak institutional capacity, high levels of corruption, and very poor policy effectiveness; “ba1” fiscal strength, with low levels of public debt but a high interest payments to revenue ratio explained by an underdeveloped revenue base, itself over-reliant on hydrocarbon revenues; and “ba” susceptibility to event risk driven by political risk, due to a fractious political landscape, militancy in the Niger Delta, and violence in the north-east that aggravates income inequality.’

Widespread predictions at the moment are that Africa’s biggest economy by GDP size may slip into another cycle of recession within the next two quarters, leading to the end of the year, 2020.



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