FG faults Moody’s downgrade of Nigeria

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    Chinedu Mordi

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    The Federal Government has disagreed with the latest Moody’s downgrade of Nigeria from a B1 stable to B2, saying it does not reflect the positive trend in the economy.
    Ratings agency Moody’s cut Nigeria’s long-term foreign-currency bond to B1 from Ba3 and kept its outlook stable, stressing Nigerian efforts to broaden non-oil revenue had been unsuccessful. The local-currency rating was unchanged at Ba1.
    However, in a joint statement by the Ministry of Finance, Central Bank of Nigeria (CBN) and Debt Management Office (DMO) yesterday, the government said: “Since Nigeria was last rated by Moody’s (as B1 stable) in December 2016, Nigeria has successfully emerged from a protracted recession and recorded important improvements across a broad range of indices.”
    The statement stressed that the Nigerian economy has witnessed a growth of 0.55per cent in Q2 of 2017, as well as returning business confidence as evidenced by a PMI index of 55.0 per cent.
    Other indicators, according to the statement, include: “a stable foreign exchange window for importers and exporters, with improving liquidity and convergence of the parallel and official rates; significantly improved foreign exchange reserves, now totalling $34 billion; increased oil production, combined with stable and now improving oil prices and a slowly improving revenue profile, with non-oil revenue (principally taxes) up 10%, month on month improvements in inflation levels since January 2017, with inflation continuing to trend downwards.”
    The statement also cited the: “Strong year on year improvement on the World Bank Ease of Doing Business Rankings from 169th to 145th place, a 24 place move in one year,” and “in 2016, the highest capital expenditure deployment since 2013, making investments in critical infrastructure to support further growth.”
    Besides, the FG observed that the Moody’s rationale for the latest rating is the need for Nigeria to improve non-oil revenue aggressively, which it says: “is absolutely and directly aligned to the government’s priorities.”
    It pointed out that it has put in place a number of measures to improve revenue such as the introduction of a tax amnesty (the on-going Voluntary Assets and Income Declaration Scheme (VAIDS)), which is showing positive results and plugging leakages and deployment of technology driven revenue management strategies.
    “We have seen improvements in revenue in 2017. Fiscal revenues are linked directly to both the performance of the economy and the number of tax payers contributing. As a result of the foundation that has been established in 2017, we expect, similar positive trends in 2018.
    “Our revenue initiatives are changing the mix of revenue sources available to government from the traditional oil or debt to a combination of oil, debt and domestic revenue. For example the 2018 budget includes N710 billion proceeds from the restructuring of the Government’s equity in the JV oil assets.
    The reform is aimed at increasing private sector equity participation to improve efficiencies in the sector and also provides revenue to the Government which will be deployed solely and exclusively for creating new assets in Nigeria,” the government stated.
    Meanwhile, Nigeria’s bonds were flat yesterday shrugging off the downgrade by Moody‘s, since investors had already factored in issues that triggered the rating change and were buying debt at a discount to book profits, traders said.
    Domestic bonds traded unchanged after some foreign investors booked profits before the rating decision. Yield on the benchmark 20-year bond rose 10 basis points to 15.03 percent, traders said.


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