Zainab Ahmed, Nigeria’s Minister of Finance, Budget and National Planning, has disclosed that the federal government is working to adress last week’s downgrade of the federal government by Moody, a United States of America- based rating agency. She described the rating as a shock.
The Minster spoke after the agency also downgraded nine top Nigerian banks.
The agency slashed Nigeria’s long-term foreign-currency and local-currency issuer ratings as well as its foreign currency senior unsecured debt ratings to Caa1 from B3 and changed the outlook to stable.
It also downgraded Nigeria’s foreign currency senior unsecured Medium Term Notes, MTN, program rating to (P)Caa1 from (P)B3. Friday’s rating action concludes the review for downgrade initiated on 21 October 2022.
Following what experts described as the biggest hit on the federal government by the respected rating firm in recent times, both local and foreign investors have abandoned federal government bonds in response.
Apparently, it’s was the investors rejection of FG bonds that elicited the Minister’s response, according to experts watching what’s going on, though Ahmed also stated that the issues raised by Moody are critical, and that the federal government is currently working to adress them.
Speaking with journalists in Abuja on Thursday, the minister said the downgrade coincided with the time the federal government is working hard to adress problems facing the economy, adding that th3 rating did not reflect the current situation in the economy.
She described the downgrade ” as a surprise to us because we had presented all the work that we have been doing to stabilise the economy.
“But these are external rating agencies that don’t have the full understanding of what is happening in our domestic environment.”
“But the reasons they gave were very practical ones. They said part of the reasons for the downgrade was that even though oil production has been restored, that there is still a high risk that there could be a relapse to the production levels.
“Secondly, they also said they are concerned that our debt service to revenue ratio is high.
“Even though their assessment is that we have been able to pay our debt and even in the medium term, they have confirmed that we have the capacity to pay our debt.
“But they are worried that it is still eating too much of our revenue and they flagged that as a high risk.
“The third major reason they gave is that our management of foreign exchange is still quite problematic in the sense that industries operating in their country are not able to get the FX requirements to meet their business needs.
“These are practical things and we had explained to them what we are working on to address each of these major challenges,” Ahmed said.
Moody had on Tuesday downgraded nine commercial banks in the country citing a combination of a weak operating environment.
The nine major Nigerian banks are: Access Bank Plc, Zenith Bank Plc, First Bank of Nigeria Limited, United Bank for Africa Plc, Guaranty Trust Bank Limited, Union Bank of Nigeria plc, Fidelity Bank plc, FCMB (First City Monument Bank) Limited and Sterling Bank Plc.
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