The Nation Newspaper

Tag: Moody

  • Moody’s upgrades Nigeria’s credit rating

    Moody’s upgrades Nigeria’s credit rating

    For the second time in as many months, Nigeria’s sovereign credit rating has been lifted into more favourable territory by a major international rating agency, with Moody’s Investors Service upgrading the country’s long-term issuer ratings from Caa1 to B3 and assigning a stable outlook.

    The Federal Government welcomed the development, describing it as further validation of ongoing efforts to strengthen macroeconomic stability and restore investor confidence under the administration of President Bola Ahmed Tinubu.

    Moody’s stated that its latest action reflects significant improvements in Nigeria’s fiscal and external positions, underpinned by policy measures adopted since President Tinubu assumed office in May 2023. 

    The move comes barely two months after Fitch Ratings upgraded Nigeria’s credit rating from ‘B-’ to ‘B’, also with a stable outlook, citing similar progress in macroeconomic indicators.

    In December 2023, Moody’s had already revised Nigeria’s outlook from Caa1 Stable to Caa1 Positive, making the current upgrade to B3 the second positive action from the agency in less than a year.

    The transition from Caa1 to B3 signifies a one-notch improvement in Nigeria’s creditworthiness. While the rating still indicates a high risk of default, it no longer falls within the “very high” risk category. This shift is seen as an indication that Nigeria is making progress in addressing vulnerabilities that have plagued its economy, including foreign exchange distortions, fiscal pressures, and debt sustainability challenges.

    The upgrade signals growing confidence in Nigeria’s economic management and is expected to strengthen its appeal to international investors. A stronger credit profile typically results in lower borrowing costs on international capital markets, improved access to foreign capital, and increased foreign direct and portfolio investments.

    Moody’s attributed its decision to the government’s commitment to correcting macroeconomic imbalances, deepening fiscal transparency, and pursuing structural reforms. Notable among these, according to the agency, are ongoing tax reforms and the adoption of a more flexible, market-driven foreign exchange regime, which has led to a more efficient allocation of resources and a bolstering of the country’s external reserves.

    Responding to the development, the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, said the upgrade reflects the administration’s determination to achieve economic stability and sustainable growth.

    “We are encouraged by Moody’s recognition of our reform agenda,” Edun said. “This positive outlook reflects our administration’s determination and the tremendous work being carried out across various Ministries, Departments, and Agencies (MDAs)—including our monetary policy authorities at the Central Bank of Nigeria—to stabilize the economy, attract investment, and ensure inclusive and sustainable growth for all Nigerians.”

    The Tinubu administration has since its inception introduced what it describes as tough but necessary reforms aimed at reversing long-standing distortions in Nigeria’s macroeconomic framework. These include the removal of petrol subsidies, unification of exchange rates, broadening of the tax base, and measures to improve public financial management.

    The Federal Ministry of Finance, in a statement, noted that the timing of the upgrade is significant, coming at a period when the government is focused on accelerating economic growth through increased private sector participation. According to the ministry, efforts are underway to improve infrastructure financing, deepen the financial sector, and expand access to capital for productive activities.

    It reiterated that the government, in collaboration with the Central Bank of Nigeria, remains committed to preserving macroeconomic stability, managing public debt sustainably, and maintaining sound fiscal practices.

    “The government will continue to collaborate with both domestic and international partners to boost investor confidence and enhance Nigeria’s global credit standing,” the ministry said.

    Analyst, Dr. Wahab Balogun, Managing Director and Chief Executive Officer of Ambosit Capital Managers said that a better credit rating provides a foundation for Nigeria to re-engage international capital markets under more favourable terms, potentially reducing debt service costs and freeing up fiscal space for development spending.

    “With the stable outlook assigned by Moody’s, Nigeria is not expected to face an imminent downgrade or upgrade. This indicates that the reforms currently in place are perceived as credible, with no immediate risks that could undermine the rating. It also reinforces the view that the government’s policy direction is yielding early positive results, though sustained implementation will be necessary to achieve long-term benefits” he said.

    He added that “the dual upgrades by Fitch and Moody’s have been received in financial and investment circles as indicators of Nigeria’s return to a path of responsible economic management, capable of restoring the country’s standing in global finance.”

    As Nigeria seeks to attract more private capital—both domestic and international—to power its development priorities, the improved ratings could become a useful lever in supporting long-term plans for economic diversification, infrastructure development, and inclusive growth.

  • $5.5b loan: Moody’s downgrade raises borrowing cost

    The Moody’s Investors’ Service downgrade of Nigeria’s long-term issuer and senior unsecured debt rating to B2 from B1 (with a stable outlook) means higher cost of international borrowing, top financial analyst Bismarck Rewane has said.

    In an email report, the Financial Derivatives Company Limited boss, said Moody’s action means that the Federal Government’s plan to raise $5.5 billion through Eurobonds sales within this fourth quarter will attract higher pricing.

    This will bring the total funds raised through the Eurobond–International Capital Market (ICM) by the Federal Government to $7 billion in less than one year. A total of $1.5 billion was previously raised in two tranches of $1 billion and $500 million.

    Moody also lowered the senior unsecured MTN programme rating and the provisional senior unsecured debt rating to (P)B2 from (P)B1. The rating outlook remains stable.

    In a report, Vice President – Senior Analyst Moody’s Investors Service, Lucie Villa, said Nigerian 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.

    But in a swift reaction, the Federal Ministry of Finance (FMF), Central Bank of Nigeria (CBN) and the Debt Management Office (DMO) said the challenges that are highlighted in Moody’s rating are clear, and are being addressed by the government with the environment having improved significantly since the last period of assessment.

    Sub-Saharan Africa Economist, at Renaissance Capital (RenCap), Yvonne Mhango, said the plan to borrow $5.5 billion through Eurobonds will raise the country’s debt service to revenue cost beyond 62 per cent.

    She said capital releases for the 2016 budget continued into the first quarter of this year while public debt has increased by seven percentage points of Gross Domestic Product (GDP) since 2014.

    On the debt service/revenue, she said: “Nigeria’s debt service/revenue has risen sharply in recent years to 62 per cent as at June 2017 against 29 per cent in 2014. This largely reflects the Federal Government’s low revenue/GDP target of four per cent this year. The Federal Government plans a $5.5 billion Eurobond issuance before year-end 2017, as part of its efforts to lower local interest rates, by reducing domestic debt/total public debt to 60 per cent, against over 70 per cent today.”

    Mhango said budget performance in the first seven months of this year and debt developments showed there were no capital releases for the 2017 budget, because it was passed late. She said the Federal Government’s 2017 budget of N7.4 trillion was 6.2 per cent of GDP, and was signed by the executive, after being passed by the Senate in May.

    Of this, N3.1 trillion (2.5 per cent of GDP) was spent in seven months. “Expenditure in seven months was 30 per cent below the (pro-rata) target and was entirely made up of recurrent spending. There were no capital releases from the budget because of its late approval. However, capital releases did take place in seventh month, as the 2016 budget continued to be implemented into first quarter of this year,” she said.

    Mhango said revenue came in on target at N2.6 trillion (2.1 per cent of GDP) because of a one-off refund from the Paris Club. “When this is stripped out, there was a 20 per cent shortfall in revenue. Below-target spending – due to delayed capital releases – explains the small budget deficit for seven months of 0.8 per cent of GDP, by our estimate, as against the 1.5 per cent (pro-rata) target,” she said.

    She disclosed that the federation account revenue was one-third below target, and that three-quarters of the FGN’s planned revenue for this year is expected to come from the Federation Account, of which two-thirds will stem from oil revenue.

    She, however, said Nigeria’s public debt/GDP is low as against the Sub-Saharan African average of 45 per cent, but it has seen a strong increase in recent years, adding that since 2014, it has risen by seven percentage points of GDP to 16.4 per cent of GDP in June 2017, with 70 per cent of the increase due to domestic debt.

  • Fed. Govt kicks as Moody’s lowers Nigeria’s sovereign rating

    Moody’s Investors Service, an international rating agency, yesterday downgraded Nigeria’s long-term issuer and senior unsecured debt rating to B2 from B1.

    It also lowered the senior unsecured MTN program rating and the provisional senior unsecured debt rating to (P)B2 from (P)B1. The rating outlook remains stable.

    In a report, Vice President – Senior Analyst, Moody’s Investors Service, Lucie Villa, said Nigerian 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.

    However, in a swift reaction, the Federal Ministry of Finance, Central Bank of Nigeria (CBN) and the Debt Management Office (DMO), said the challenges that were highlighted in the Moody’s rating are clear, and are being addressed by the government, with the environment having improved significantly since the last period of assessment.

    “While we respect the right of Moody’s to make this decision, we strongly disagree with the premise and must address some of the conclusions upon which the decision rests. 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 stable outlook reflects Moody’s view that the risk of a shock occurring that would further impair Nigeria’s economic and fiscal strength remains low, in part because of the recent improvement in the growth outlook and the measures taken to address foreign exchange shortages.

    According to the report, 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.

    It said 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 Federal government also listed a return to economic growth of 0.55 per cent in second quarter 2017, and returning business confidence, as evidenced by a Purchasing Managers’ Index index of 55.

    The government also cited a stable foreign exchange window for importers and exporters, with improving liquidity and convergence of the parallel and official rates and significantly improved foreign exchange reserves, now totaling $34 billion for disagreeing with Moody’s.

    “Increased oil production, combined with stable and now improving oil prices. A slowly improving revenue profile, with non-oil revenue (principally taxes) up 10 per cent. Month on month improvements in inflation levels since January 2017, with inflation continuing to trend downwards. Strong year on year improvement on the World Bank Ease of Doing Business Rankings from 169th to 145th place, a 24 place move in one year. In 2016, the highest capital expenditure deployment since 2013, making investments in critical infrastructure to support further growth,” the government said.

    Continuing, it said that at the heart of Moody’s rationale is the need for Nigeria to improve non-oil revenue aggressively. “This is absolutely and directly aligned to the government’s priorities. This is critical to our economic development and is the basis for the establishment of a stable and inclusive economy, which can withstand global shocks and has the resources to increase investments in our infrastructure. We have put in place a number of measures to improve our collection and FIRS has made good progress in increasing revenues, particularly when considering that the economy is still recovering from the oil price shock”.

  • Moody: Nigeria ‘ll ‘easily’ get $3.5b foreign loan

    Nigeria will easily achieve its target of $3.5 billion foreign borrowing  this year as improved oil output helps the economy to recover from last year’s contraction, the first since 1991, Moody’s Investors Service has said.

    Its Vice President and Senior Analytical Adviser for Africa, Aurelien Mali, said: “The international financial institutions are ready to support Nigeria. As long as its project-based lending, the funding will be available from lenders such as the African Development Bank (AfDB), and the budget support from the World Bank will come on top of that.”

    The government has been negotiating $1.25 billion in budget support from the World Bank and expects to get the remaining $400 million of a $1 billion credit facility from theAfDB, Mali said. It can raise the rest from bilateral and multilateral partners and also from lenders through commercial loans and or even a sukuk bond, he added.

    Moody’s rates Nigeria’s debt at B1, four levels below investment grade. Last month, S&P Global Ratings kept its assessment of the nation’s credit at one step lower than Moody’s.

    The nation will probably raise debt through more Eurobond sales this year, the International Monetary Fund (IMF) said. This is in addition $500 million placed last month as part of the 2016 budget and $1 billion raised in February.

  • Moody’s reaffirms Sterling Bank’s ratings

    Moody’s reaffirms Sterling Bank’s ratings

    Moody’s Investors Service, a leading global rating agency, has re-affirmed the resilience of the Sterling Bank franchise by maintaining the bank’s standalone Baseline Credit Assessment (BCA) ratings of B3.

    BCAs are inputs to Moody’s joint-default analysis for ratings on issuers subject to extraordinary government support. It measures the financial strength of issuers subject to extraordinary government support, which can include banks, sub-sovereigns and government-related corporate issuers (GRIs). It explicitly excludes the likelihood of extraordinary government support in the event that a bailout is required, but does incorporate support as may be necessary for ordinary operations.

    The Rating Agency in a statement made available to newsmen in Lagos, expressed confidence that with its current profile, Sterling Bank will remain resilient in the face of more challenging operating conditions given its adequate capital and liquidity buffers.

    The agency in the statement explained further that: “Sterling Bank’s B2 deposit ratings continue to incorporate one notch of rating uplift on account of government support as the bank’s ratings remain lower than the sovereign rating and it’s foreign currency deposit rating is now in line with the lowered foreign currency deposit ceiling of B2″.

    Specifically, Moody’s rated Sterling Bank B3 in Adjusted Baseline Credit Assessment; B1 (cr) in Long-Term Counter-party Risk Assessment; B2 in Long-Term Issuer Rating (Local and Foreign Currency); B2 in Long-Term Deposit Rating (Local and Foreign Currency) while the outlook changed to stable.

    The bank’s Executive Director, Finance & Strategy, Abubakar Suleiman, noted that the reaffirmation of the rating is a testimony of the resilience of the bank to remain strong and professional despite the challenging operating environment in which it operates.