By Yinka Kolawole

The Lagos Chamber Chamber of Commerce and Industry (LCCI) has lamented the downgrading of Nigeria’s sovereign risk profile by three leading global default risk rating agencies.

Recall that Fitch downgraded Nigeria’s long-term foreign currency debt Issuer Default Rating (IDR) from ‘B’ to ‘B-, few notches above a junk status, following Moody’s lead in downgrading Nigeria’s risk outlook, and Standard and Poor’s placement of Nigeria’s Eurobonds on its watchlist.

In a statement made available to Vanguard on Sunday, Director General, LCCI, Dr Chinyere Almona, noted that the Chamber is gravely concerned about the downgrades.

She stated: “The rating agencies all pinned Nigeria’s deteriorating risk profile down to weakening external and government finances, especially the fact that declining government revenues are now falling short of rising interest payments on government debt; inadequate availability of foreign exchange; and heightened exchange rate uncertainty, all in the face of strong global oil prices.

“Rather than continue as if nothing has happened, the government of Nigeria needs to explicitly address the issues flagged by multiple global risk rating agencies and announce measures to de-escalate the risks arising from them.”

Almona suggested actions to be taken by the government to allay concerns expressed by the three rating agencies.

Her words: “A commitment by the government to immediately expedite the attainment of the following positive outcomes will allay the legitimate concerns expressed by the three global rating agencies: Reduce revenue leakages; Boost government revenue; Raise debt quality to reduce interest payments;  Increase forex inflows through foreign direct investment (FDI); and Emphasize equity financing of the 2023 Federal Budget.”

She further noted: “The main problem with Nigeria’s debt is not the size but the cost. Malaysia’s debt stock of $225 billion is more than twice Nigeria’s debt of $100 billion but the average interest rate on Malaysia’s debt is less than half of the average of 12 percent that Nigeria spends on lower debt stock. Saudi Arabia also owes more than $260 billion but enjoys an average interest rate that is also less than half of Nigeria’s.

“The difference between Nigeria and these countries is that they issue higher quality debt that attracts investment grade ratings from the same global risk rating agencies that are currently downgrading Nigeria’s risk profile towards a junk issuer status.”

LCCI cautioned: “With every sense of responsibility and precaution, we urge the government to be more sensitive to the crisis indicators that are being pointed to by critical stakeholders and announce timely commitments to take required actions.”

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