Tony Chukwunyem 
Moody’s Investor Service’s latest downgrade of Nigeria may make it more difficult for the country to raise commercial debt from external sources and attract foreign capital, analysts at FBNQuest Research have said. The analysts, who stated this in a report released over the weekend, noted: “The latest rating downgrade is the country’s lowest since Moody’s began its credit rating of the country in 2006.” They also noted that the rating downgrade was mainly driven by expectations that the Federal Government’s fiscal and debt position would continue to deteriorate.
After downgrading Ni-geria’s local and foreign currency to B3 from B2 in October last year, Moody’s, last week, downgraded the Federal Government’s long-term foreign currency and local-currency issuer ratings, as well as its foreign currency senior unsecured debt ratings from B3 to Caa1, and changed the country’s outlook to stable. Commenting on the development, the FBNQuest analysts stated: “The downgrade has significant implications, including challenges in raising commercial debt from external sources, higher pricing of the country’s debt on the international capital market, difficulty in attracting foreign capital, and potential capital flow reversals.”
Noting that the agency further lowered Nigeria’s local currency and foreign currency ceilings to B2 and Caa1 respectively, previously from B1 and B3, the analysts said Moody’s attributed the continuous weakening of the naira to the non-diversification of the country’s external position, as well as uncertainties around government policies. Also noting that the agency lowered Nigeria’s foreign currency senior unsecured MTN programme rating to (P)caa1 from P(B3), the analysts said that Moody’s expectation is that the, “continuous strain on the government’s fiscal position due to the decline in oil production output, the lingering issue of fuel subsidies, and the elevated interest rate will likely continue over the next couple of years.” They pointed out that in relation to its African peers, Nigeria’s currency rating of Caa1 compares with that of Angola, Mauritius, and Tunisia of B3, Baa3, and Caa2 respectively.
