Obinna Chima

Moody’s Investors Service, one of the global credit rating agencies, wednesday changed its outlook on Nigeria’s ratings to negative from stable.

Concurrently, Moody’s affirmed its 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 on the country.

According to the rating agency, the negative outlook reflected Moody’s view of increasing risks to the government’s fiscal strength and external position.

It explained: “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.”

Furthermore, it pointed out that Moody’s decision to affirm the rating at B2 recognized 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.

“Concurrently, Moody’s 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.”

Moody’s also said the drastic reduction in Nigerian banks’ non-performing loans (NPLs) will help in reducing the risk of capital erosion from unexpected losses and lessens the need for loan loss provisions.

Nigerian banks’ NPLs reduced to 6.6 per cent at the end of October compared to the 14.1 per cent it was in 2018.

This was the first time the NPLs would drop to a single digit in the past 42 months.

But the rating agency’s banking analysts, Mr. Peter Mushangwe, in a note obtained by THISDAY yesterday, described the development as credit positive.

“The Nigerian banking system’s non-performing loans ratio reduced to 6.6 per cent at the end of October from 14.1 per cent a year earlier, according to the central bank. This is credit positive, as lower NPLs reduce risk of capital erosion from unexpected losses and lessen the need for loan loss provisions. The improvement in asset quality is mainly due to banks’ growing loan books, write-offs and successful workout of exposures,” he stated.

Moody’s has maintained a stable outlook on the Nigerian banking system.

“Our view reflects the banks’ resilient capital buffers and their stable deposit bases. Although Nigerian banks’ asset risk and profitability will remain key rating challenges, we expect these challenges to gradually ease in 2020 as the economy improves further,” the agency added.

It predicted that economic growth would be modest as the real Gross Domestic Product (GDP) would expand to 2.3 per cent in 2019 and 2.8 per cent in 2020, up from 1.9 per last year.
However, it noted that the GDP projection would be well below the level required to improve Nigerians’ living standards.

It said: “Lending growth will recover in the second half of the year following a contraction in 2018, but it will remain subdued and will not appreciably boost banking revenue.

“The Nigerian economy will remain vulnerable to oil price movements. Loan quality pressures will ease but remain banks’ main weakness.

“Higher oil prices will constrain new NPL formation while high loan-loss reserves will allow banks to write off some of their bad debts.

“These credit positives will be moderated by lingering risks from high loan concentrations and high delinquency levels. Capital buffers will remain stable.

“System-wide tangible common equity will be stable at 16 per cent of risk-weighted assets at year-end 2018, which will be sufficient to absorb losses under our baseline scenario.”

A member of the Central Bank of Nigeria (CBN) Monetary Policy Committee (MPC), Prof. Adeola Adenikinju, had said the financial systems indicators were in the right direction.

He noted that unemployment, poverty and weak growth were major structural problems in the economy, saying that unfortunately, there was a limit to the potency of monetary policy alone to address problems of power deficit, infrastructural gaps and other factors contributing to high costs of doing business in Nigeria.

These problems, unless addressed, would also limit the extent to which the country can effectively benefit from the Africa Continental Free Trade Agreement (AfCFTA), he said.

izzou:


I read this thread thrice, and I still don't understand what they are saying.

Kindly quote with and explanation if you understand.

I don't want to type "Buhari has finished us" for no reason

ZombieTERROR:


Buhari has finished the country

Every rating is negative... There is nothing positive about the country since he took over..

Job losses... Food prices skyrockets... Suicide capital of the world... Poverty capital of the world... Insecurity everywhere...

Buhari is a punishment to the nation

At least, explain the thread for me naa

Na knowledge I come find

izzou:


At least, explain the thread for me naa
Na knowledge I come find

izzou:


I read this thread thrice, and I still don't understand what they are saying.

Kindly quote with and explanation if you understand.

I don't want to type "Buhari has finished us" for no reason

pocohantas:


Credit rating determines your ability to pay back debts (simply put). Investors use it all the time.

Starts from Aaa and slides to a C, with C being the lowest. B somewhere in the middle and B2 in the lower middle. So, currently, your dearest Nigeria is on B2 (High risk) and they can easily slide to a B3 and ultimately a C (variant).

We do not have much oil to sell anymore. Only an increase in our non-oil revenue can help us escape from impending doom. At least we now know why baba wants to kill us with tax. Money must be made to finance capital projects.

Thank you

So I can confidently say "Buhari is about to fail us"

ursullalinda:
Yet some people want me to believe our economy has improved alot.....and Bubu is our saviour......God help us in this next level.

ZombieTERROR:


You need me to explain a negative rating for you?

Negative rating of??

How did it turn out to be negative?

How can it return to positive?



Why are you like this?

izzou:


Thank you

So I can confidently say "Buhari is about to fail us"

pocohantas:


Credit rating determines your ability to pay back debts (simply put). Investors use it all the time.

(Moody's) Starts from Aaa and slides to a C, with C being the lowest. B somewhere in the middle and B2 in the lower middle. So, currently, your dearest Nigeria is on B2 (High risk) and they can easily slide to a B3 and ultimately a C (variant).

We do not have much oil to sell anymore. Only an increase in our non-oil revenue can help us escape from impending doom. At least we now know why baba wants to kill us with tax. Money must be made to finance capital projects.

mrvitalis:
Buhari economic policy has been largely protectionist and socialist

With accountants both CBN and finance minister I never really expected much ...

Forcing us into rice production cost us close to lose 4000 dollars per hectare ,a crop we are presently comparatively disadvantages

Ask your if u are an investor would u invest in Nigeria ...when u have Ethiopia offering everything we have to offer and more

Stalwert:


But sir, only a fool will not know government had a cash flow problem, because Nigerians don't pay tax especially the rich. If you want to enjoy infrastructure we must sadly be ready to pay for it. Even when Jonathan was in power be borrowed to pay salaries... The truth is we are not ready to pay for development.

pocohantas:


You are right, I agree we have to pay for development, but we are not even seeing anything on ground. I bet if there was power, good roads and enabling environment for life and business- every sane human would be okay with paying.

This problem is more than Buhari tbh. Maybe he worsened it, but the system has never been in place.

Stalwert:


Nairaland errconomists, Agriculture is it advantage most of the rural population is into farming and most of the rural population actually consume local rice before now. How rice became a disadvantage in a country that has always produced rice is just another smugglers themed logic by wannabe errconomists

Stalwert:
Government reforms in the banking sector is taking hold and stabilizing it. FG needs to consolidate on income generation by further improving tax collections rate our GDP to Tax ratio remains low. There are many productive ventures and people but few tax payers.

ZombieTERROR:


Buhari has finished the country

Every rating is negative... There is nothing positive about the country since he took over..

Job losses... Food prices skyrockets... Suicide capital of the world... Poverty capital of the world... Insecurity everywhere...

Buhari is a punishment to the nation

izzou:


Negative rating of??

How did it turn out to be negative?

How can it return to positive?



Why are you like this?

mrvitalis:

What's the monetary value of the output of one hectare of rice

What's the total output for casava do the maths then u would see ..if you are smart enough

Iamgrey5:
Government needs to improve revenue to assure creditors it can pay his loans

It's kind of cycle under development world bank and imf trap developing countries.

1) devalue your currency

2) cut public spending

3) Privatise profitable public institutions

4) increase government revenue

5) Further increase poverty while investors in the first world smile to the bank.

6) After years of suffering, Rating agencies increase your credit ratings to B+ pending when the third world country borrow more money.

Stalwert:


They are undermining our capacity to borrow, they want to make borrowing more costly for Nigeria. But sai Baba will not be hindered, he has continue to defy their foolish advise that causes Agentinas economy to tank and Egypt to make a u turn from completely floating their currency.

Amucha:


How can you collect more taxee when companies are closing down, increased retrenchment and unemployment, border closure and increased emigration?

pocohantas:
Iamgrey5, where have you been?

Iamgrey5:
I don't think Buhari can continue defy them.

Although China offers an alternative to the Bretton woods institutions of IMF and World bank. China itself cannot be trusted.