Nigeria's debt management capacity remains weak - Moody's

Muhammadu Buhari and Yemi Osinbajo
  • Although Nigeria's debt level is low, Moody's says the country's debt management capacity is weak and poses concern over the sustainability
  • Togo, Ghana, and Nigeria are among the West African countries facing risks to their debt sustainability
  • Senegal and Ivory Coast have the highest external debt private creditors but have the best financial management capacity

Nigeria's debt management capacity remains weak and fiscal metrics are deteriorating, Moody's Investors Service said in a report today.

According to the rating agency report, debt burden across ECOWAS (Economic Community of West African States) countries have doubled since 2010 and posed a serious concern over the government's debt sustainability.

"Debt burdens in the ECOWAS are now almost double what they were in 2010 and are unlikely to fall, raising concerns about debt sustainability, with potentially significant economic and social costs," said Lucie Villa, a Moody's Vice President - Senior Credit Officer and the report's co-author.

Specifically, Moody's said risks to debt sustainability such as adverse debt dynamics, weak financeability, and debt management capacity is prominent with Nigeria, Togo, and Ghana.

"Although Nigeria's debt levels are low, debt dynamics are becoming adverse and fiscal metrics are deteriorating while debt management capacity remains weak. Others, including Mali (B3 stable) and Niger (B3 stable), have more sustainable debt burdens under Moody's central scenarios but they remain vulnerable to shocks that could materially increase their debt burdens and undermine their debt sustainability.

“More highly rated Senegal (Ba3 stable) and Côte d'Ivoire (Ba3 stable) have the highest external debt owed to private creditors as a share of GDP, but have the best financial management capacity.”

At the end of the 128th meeting of the Central Bank of Nigeria's MPC meeting in January 2020, members cautioned the Nigerian government over rising public debt. The CBN MPC identified the country's debt profile as one of the downside risks to economic growth.

The MPC, however, cautioned that public debt was rising faster than both domestic and external revenue, noting the need to tread cautiously in interpreting the debt to GDP ratio.

Nigeria’s total public debt stood at $71.58 billion (N26.22 trillion) as of September 2019, according to the latest figures from the Debt Management Office (DMO).

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