Zainab Ahmed, Nigeria’s Minister of Finance, Budget and National Planning, has said she is shocked by the recent downgrade of the country’s credit rating by Moody’s Investors Service, a US-based rating agency.
Moody’s had last weekend, downgraded Nigeria’s credit rating from B3 to Caa1, saying the government’s fiscal and debt position was expected to continue to deteriorate.
Folowing Moody’s downgrade, Nigeria’s government bonds were, on Monday, dumped at its fastest pace in three months.
Speaking with journalists in Abuja on Thursday, Ahmed said the downgrade was surprising.
She explained that despite presenting evidence of the government’s efforts to stabilise the economy, the rating did not reflect a proper understanding of the domestic economy.
“Moody’s downgrade came as a surprise to us because we had presented all the work that we have been doing to stabilise the economy,” Ahmed said.
“But these are external rating agencies that don’t have the full understanding of what is happening in our domestic environment.”
“But the reasons they gave were very practical ones. They said part of the reasons for the downgrade was that even though oil production has been restored, that there is still a high risk that there could be a relapse to the production levels.
“Secondly, they also said they are concerned that our debt service to revenue ratio is high.
“Even though their assessment is that we have been able to pay our debt and even in the medium term, they have confirmed that we have the capacity to pay our debt.
“But they are worried that it is still eating too much of our revenue and they flagged that as a high risk.
“The third major reason they gave is that our management of foreign exchange is still quite problematic in the sense that industries operating in their country are not able to get the FX requirements to meet their business needs.
“These are practical things and we had explained to them what we are working on to address each of these major challenges.”
Ahmed encouraged Nigerians to look forward to S&P’s rating due for release on Friday, adding that “it is expected to present a better outlook for Nigeria”.
