Nigeria: Moody's Negative Outlook Reflects Current Realities - Experts

9 December 2019

Lagos — Moody's negative outlook on Nigeria reflects current realities in the country, experts have said.

However, the rating agency affirmed the B2 long-term local and foreign currency issuer ratings, the B2 foreign currency senior unsecured ratings, and the (P) B2 foreign currency senior unsecured MTN programme rating.

This is the second change made since November 2017, when Moody downgraded Nigeria's sovereign issuer rating to B2 from B1, but maintained a stable outlook.

Analysts at Afrinvest have said the change in outlook is unsurprising although worrisome and clearly reflects the prolonged weak macroeconomic fundamentals, continuous decline in the trade surplus to ₦242.8bn (Q2:2019 trade report), downtrend in capital importation to $5.4bn (Q3:2019) and the moderation in external reserves to $39.7bn (down 12.0% since H1:2019 and 8.0% YTD), amid elevated global risks which Nigeria faces.

On the fiscal side, the FG's debt profile is still growing amid weak revenues with the total public debt as at H1:2019 rising 5.4% to ₦25.7tn ($83.9bn) from ₦24.4tn ($79.4bn) as at FY:2018 due to increased FG borrowings at 6.2% to ₦20.4tn.

They further suggested that as the FG plans a return to the Eurobond market to partly finance the 2020 budget deficit of ₦2.4tn, the outlook downgrade may trigger weaker investor's appetite for the Nigerian Eurobond market.

Also speaking on the development, FXTM Senior Research Analyst, Lukman Otunuga said: "Given how the negative outlook reflects Moody's view of increasing risks to the government's fiscal strength, this should act as another wakeup call for the nation to diversify and move away from oil reliance.

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