Nigeria’s rating was further downgraded by Moody’s Investors Service to junk, and the country was put under review for a future downgrade as the state of its finances worsened. Nigeria’s rating was downgraded by one place by the agency to B3, which is tied for the sixth-worst place with Angola and Mongolia.
The statement from Moody’s on Friday, the nation’s risk of default could rise as a result of the continuous fiscal and external deterioration, which could impede the government’s ability to service debt.
According to experts Lucie Villa and Marie Diron, “the sharp decline in oil output in 2023 and the prolongation of the expensive oil subsidy have almost fully undermined the boost to government revenue and exports that would have otherwise been anticipated from higher oil prices.” There are few policy tools available to manage Nigeria’s and the world’s tightening monetary conditions, which include declining oil revenues and rising borrowing prices.
They claimed that the central bank’s ability to defend foreign exchange reserves from external inflows has its boundaries. The government announced this week that Nigeria wants to convert at least 20 trillion naira ($45.4 billion) in loans obtained from the central bank into 40-year bonds, the first time it has done so due to pressure on the country’s public finances.
The anticipated bond comes after the finance minister alarmed international investors last week in Washington, DC, by claiming that the country was considering reorganizing its obligations.
However, the West African country’s finance minister has stated that the holders of its Eurobonds will not be included in a plan to lengthen the maturities of its existing loans, which is not the same as “restructuring” its commitments.