Moody's: Nigeria's ratings dropped to negative from stable over increasing risks to fiscal strength and narrow revenue base

Moody's changes outlook on Nigeria's B2 rating to negative from stable
Moody's says weak government finances will likely weaken further given an extremely narrow revenue base and persistently sluggish growth that hinders fiscal consolidation.
The credit rating agency also maintains Nigeria's country risk ceilings at their current levels.

Moody's Investors Service on Wednesday changed the outlook on the government of Nigeria's ratings to negative from stable.

Concurrently, Moody's has affirmed the B2 long-term local and foreign currency issuer ratings, the B2 foreign currency senior unsecured ratings, and the (P) B2 foreign currency senior unsecured MTN programme rating.

“The negative outlook reflects Moody's view of increasing risks to the government's fiscal strength and external position. Already weak government finances will likely weaken further given an extremely narrow revenue base and persistently sluggish growth that hinders fiscal consolidation. As pressures mount, there is a risk that the government resorts to increasingly opaque and costly options to finance a moderate but rising debt burden. Moreover, vulnerability to an adverse change in capital flows is building in light of Nigeria's increasing reliance on foreign investors to fund the country's foreign exchange reserves,” the report made available to Business Insider SSA, reads

The negative outlook reflects Moody's view of increasing risks to the government's fiscal strength and external position. Already weak government finances will likely weaken further given an extremely narrow revenue base and persistently sluggish growth that hinders fiscal consolidation. As pressures mount, there is a risk that the government resorts to increasingly opaque and costly options to finance a moderate but rising debt burden. Moreover, vulnerability to an adverse change in capital flows is building in light of Nigeria's increasing reliance on foreign investors to fund the country's foreign exchange reserves.

Moody's says its decision to affirm the rating at B2 recognises a combination of credit strengths including the country's large and diversified economy supported by vast oil and gas endowments, notwithstanding persistent credit weaknesses such as its very weak institutions and governance framework and in particular poor public finance management.

It also has maintained Nigeria's country risk ceilings at their current levels: Foreign Currency bond ceiling at B1, Foreign Currency deposit ceiling at B3, and Local Currency bond and deposit ceilings at Ba1.