The credit ratings of Nigeria and Angola, Africa’s two biggest oil producers, were among four countries downgraded by Moody’s Investors Service, citing the negative impact depressed oil prices have had on these governments’ balance sheets, liquidity and creditworthiness.
Nigeria and Gabon were cut to B1 from Ba3 as “the prospect of lower-for-longer oil prices” raises liquidity risks and external vulnerability, according to statements released by the ratings firm weekend. Angola was lowered to B1 and the Republic of the Congo to B2 from B1 on similar concerns about the countries’ high dependence on oil, constraining their financing options, Moody’s said.
The moves mark the end of a review Moody’s began on March 4 for possible downgrades of more than 10 oil producing nations, as it assessed the impact of the sell off in oil. Russia and Azerbaijan’s ratings were affirmed while Kazakhstan and Trinidad and Tobago were downgraded to Baa3. Decisions are pending for Abu Dhabi, Kuwait, Saudi Arabia, the United Arab Emirates, Bahrain, Qatar and Papua New Guinea.
The collapse in commodity prices has forced governments to trim the spending that has helped fuel their economic growth over the past decade. Fiscal deficits are on the rise as these countries increase borrowing to make up for the shortfall in revenue. In contrast to the other three African nation, Nigeria was issued a stable outlook on confidence in the country’s credit fundamentals when compared to its peers, Moody’s said in the statement.
“The stable outlook is driven by Moody’s view that the downside risks posed by the weakening of the country’s fiscal strength, and the external and economic pressures anticipated this year and next, are balanced by Nigeria’s strengths, which exceed those of sovereigns rated below B1,” the analysts wrote.