Nigeria’s Minister of Finance, Budget, and National Planning, Zainab Ahmed, expressed dismay at the recent reduction of the country’s credit rating by US rating agency Moody’s Investors Service.
Moody’s lowered Nigeria’s credit rating from B3 to Caa1 over the weekend, citing the government’s predicted fiscal and debt situation deterioration.
As a result of Moody’s downgrading, Nigerian government bonds were dumped at the fastest rate in three months on Monday.
Ahmed told journalists in Abuja on Thursday that the demotion was unexpected.
She explained that despite providing evidence of the government’s attempts to stabilize the economy, the grade did not reflect an accurate comprehension of the domestic sector.
“Moody’s downgrade came as a surprise to us because we had presented our efforts to stabilize the economy,” Ahmed explained.
However, these are foreign rating bodies that lack a comprehensive comprehension of our local situation.
“However, the explanations they provided were quite pragmatic. Even if oil production has been restored, there is still a substantial possibility of a relapse to pre-restoration levels, which was cited as one of the reasons for the downgrading.
“Secondly, they also expressed concern about our high debt service-to-revenue ratio.
Even though their evaluation is that we have been able to pay our debt, they have affirmed that we have the capacity to pay our obligation in the medium term.
“However, they are concerned that it is still consuming too much of our revenue, and they have identified this as a significant risk.
“Thirdly, they stated that our management of foreign exchange is still troublesome in the sense that industries operating in their nation are unable to obtain the FX requirements necessary to meet their business needs.
We outlined to them what we are doing to address each of these big concerns as they are practical matters.
Ahmed encouraged Nigerians to anticipate the announcement of S&P’s rating on Friday, stating that “it is expected to provide a more optimistic view for Nigeria.”