Nigeria’s public finances will continue to deteriorate. – Moody’s

Africa

Nigeria’s public finances will continue to deteriorate. – Moody’s

January 30, 2023January 30, 2023

After Moody’s downgraded Nigeria late on Friday from B3 to Caa1, warning that the government’s fiscal and debt position was expected to worsen, Nigeria’s government bonds experienced a significant decline on Monday.

The 2051 Eurobond, which is denominated in dollars, dropped more than 2.6 cents in the dollar to 68.892 cents, according to Tradeweb data. Longer-dated maturities were down the most.

The government’s ability to manage the continuous deterioration without relieving the burden of its debt through any kind of default, including debt exchanges or buy-backs, was the focus of the review for downgrade, according to Moody’s.

The government of Nigeria has attributed the deteriorating status of its public finances, which have been stifled by theft and pipeline vandalism, to the national oil company’s 4.39 trillion naira ($9.54 billion) expenditure on a fuel subsidy last year.

Just the interest payments on Nigeria’s debt are expected to consume roughly half of the government’s revenue in the medium term, up from 35% in 2022, according to Moody’s. Furthermore, it predicts that the debt-to-GDP ratio would increase to 45% from 19% in 2019 and 34% last year.

According to the International Monetary Fund, the nation spent 80% of its 2017 revenue on debt payments, a ratio that might increase to 100%.

According to Moody, “immediate default risk is modest, assuming no rapid, unforeseen events” like another shock or a change in policy.

In an interview with Bloomberg TV earlier in January, Nigeria’s finance minister Zainab Ahmed stated that the country’s debt trajectory was sustainable and that the goal was to reduce the debt-to-GDP ratio to 60% in 2023.

20k

60k

100k

500k

600k