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Moody’s raises fresh concern over FG’s credit profile

By Nkiruka Nnorom

Moody’s Investors’ Services, a global credit rating agency, has said that Nigeria’s credit profile at B2 Stable is constrained by the country’s continued exposure to shocks, weak institutions and elevated deficits.

The rating agency said in its annual report titled, “Government of Nigeria – B2 stable, Annual credit analysis”, that the country’s credit strengths include the large size of the economy and robust medium-term growth prospects supported by the domestic demand.

According to the report, the continuing recovery in oil production underpins the country’s more robust medium-term prospects.

It stated that with a rebalanced economy, a further consolidation of the economic fundamentals will strengthen the recovery, with real growth of 3.3 per cent in 2018 and 4.5 per cent in 2019.

The federal government is projecting real GDP growth of 3.5 percent year-on-year in the 2018 budget.

However, noting that the recent growth in the economy as a result of positive developments in the international oil prices and output level, Moody’s warned that the growth would remain fragile in the face of weak alternative source of economic strength.

“Only a durable increase in non-oil revenue will improve Nigeria’s resilience to oil price volatility and increase the realisation rates of capital spending on the large infrastructure projects that are crucial for Nigeria’s economic development,” said Aurélien Mali, Moody’s Vice President, Senior Credit Officer and co-author of the report.

“Until it does, the government’s balance sheet will remain exposed to further shocks. Deficits will remain elevated and debt affordability will remain challenged. This exposure will persist, despite recent improvements in the economy, which are primarily cyclical and related to the strengthening of the oil sector,” he added.

Moody’s further projected a general government budget deficit of 3.6 percent of GDP in 2017, down from 4.7 percent in 2016, saying that in 2018, the deficit will decline only slightly, to 3.2 percent of GDP, comprising a two percent of GDP federal government budget deficit and around one percent of GDP deficit at the state and municipality levels, as well as arrears that are likely to be split between the three levels of government.


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