By Adedapo Adesanya
Credit rating agency, Moody’s, has maintained a B2 long-term issuer rating for Nigeria’s credit worthiness.
The US-based agency also maintained a negative outlook for Nigeria due to the continuous spread of the coronavirus, related oil price shocks and its effect on the largest economy on the African continent.
According to the agency, these factors are creating an unprecedented credit shock across a wide range of regions and markets in the country.
And for Nigeria, these shocks have worsened existing credit vulnerabilities both over the immediate and longer term.
In general, a credit rating is used by sovereign wealth funds, pension funds and other investors to gauge the credit worthiness of the country, thus having a big impact on its borrowing costs.
According to the report, “In the longer term, the impact of the coronavirus on growth, particularly in the large informal sector, may weaken economic strength.
“The sovereign’s very low institutions and governance strength is likely to constrain the effectiveness of government measures to buffer the impact of the economic and financial shock.”
The agency stated that its decision to retain Nigeria’s B2 ratings took into account the government’s relatively low debt burden in relation to Gross Domestic Product (GDP), commensurately low annual borrowing requirements, its low external debt service needs over the next few years and the capacity of the large banking sector to absorb more government debt.
This will be Africa’s largest economy second negative credit rating this year. Earlier this month (April 6), Fitch’s credit rating for Nigeria was also set at B with a negative outlook.
On the other hand, Standard & Poor (S&P) credit rating for Nigeria released on March 26 stood at B- with stable outlook.
