Moody’s Investors Service downgraded Nigeria’s long-term issuer ratings to B1 from Ba3 as of this past Sunday and has assigned a stable outlook, concluding the review for downgrade initiated on March 4th 2016.
The key drivers of today’s rating action are as follows:
1) Increased external vulnerability brought about by the prospect of lower-for-longer oil prices;
2) Execution risk in the transition to a less oil-dependent federal budget, and the implications for the government’s balance sheet should it not achieve its aims;
3) An elevated interest burden over the next two years while the government grows its non-oil tax receipts.
The stable outlook reflects the fact that Nigeria’s credit fundamentals will continue to compare favorably with peers at the B1 level, despite the likely further deterioration in the country’s credit metrics due to the oil price shock.
Concurrently, Moody’s has lowered Nigeria’s long-term foreign-currency bond ceiling to Ba3 from Ba2, the long-term foreign-currency deposit ceiling to B2 from B1, and the long-term local-currency bond and deposit ceilings to Ba1 from Baa3.
INCREASED EXTERNAL VULNERABILITY RESULTING FROM THE PROSPECT OF LOWER-FOR-LONGER OIL PRICES