9 November 2017

Nigeria: Treasury Instruments Crash On Moody's Downgrade

Photo: The Guardian
(file photo).

Lagos — Amidst disagreement between Federal Government and Moody's Investment Services, a global financial rating agency, over the later's downgrade of Nigeria, the country's bond and treasury instruments crashed yesterday, at the short end of the tenors.

The 30-Day and 90-Day Nigerian Interbank Offered Rate, NIBOR, decreased to 19.94% and 21.21% respectively, though the 180-Day NIBOR increased to 23.04%

The discount rates on the Nigerian Treasury Bills (NTBs) depreciated significantly also by an average of about 50 basis points in the 2-way-quote market, though market activity was very high and trading was across all bills on the curve The investment banker, FSDH Merchant Bank Limited, in a release last night, stated: "Prices dipped across all the maturities traded today in the 2-way quote Bond Market, as the market reacted to Moody's downgrade of Nigeria's sovereign issuer rating from B1 to B2.

"The high yields seen following the sell-off generated interest from the PFAs (Pension Funds Administrators) although prices ultimately closed lower than opening level"

The Federal Government has disagreed with the latest Moody's downgrade of Nigeria from a B1 stable to B2, saying it does not reflect the positive trend in the economy.

Moody's Investor Service two days ago announced the downgrade of the federal government's long-term issuer credit rating, thus reversing the rating assigned by them to the Nigerian government in December 2016.

Issuer credit rating is a forward-looking evaluation about an obligor's overall credit worthiness.

The downgrade by the international rating agency indicates that the government is now less likely to meet its domestic and foreign financial commitments.

FG kicks

But in a joint statement by the Ministry of Finance, Central Bank of Nigeria and Debt Management Office yesterday the Federal Government stated: "Since Nigeria was last rated by Moody's (as B1 stable) in December 2016, Nigeria has successfully emerged from a protracted recession and recorded important improvements across a broad range of indices."

The statement stressed that the Nigerian economy has witnessed a growth of 0.55% in Q2 of 2017, as well as returning business confidence as evidenced by a PMI index of 55.0%.

Other indicators include; a stable foreign exchange window, with improving liquidity and convergence of parallel and official rates.

Reeling out positive developments to counter Moody's rating the government further stated: "Significantly improved foreign exchange reserves, now totalling $34 billion. Increased oil production, combined with stable and now improving oil prices. A slowly improving revenue profile, with non-oil revenue (principally taxes) up 10%, month-on-month improvements in inflation levels since January 2017, with inflation continuing to trend downwards.

More on This

Govt Disagrees With Moody's Downgrading of Nigeria to B2 Stable Rating

The federal government has disagreed with Moody's downgrading of Nigeria to a B1 stable rating to a B2 stable rating. Read more »

Copyright © 2017 Vanguard. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.

AllAfrica publishes around 900 reports a day from more than 140 news organizations and over 500 other institutions and individuals, representing a diversity of positions on every topic. We publish news and views ranging from vigorous opponents of governments to government publications and spokespersons. Publishers named above each report are responsible for their own content, which AllAfrica does not have the legal right to edit or correct.

Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica. To address comments or complaints, please Contact us.