Moody’s Investors Service left Nigeria’s credit ratings unchanged at B2 with a negative outlook Thursday, opting to hold off on a downgrade.
Other credit rating agencies, Standard and Poor’s and Fitch, have downgraded Nigeria to junk in the past month over the decline in oil prices and the impact of the coronavirus pandemic on economic growth.
“Our negative outlook continues to reflect the material downside risks to Nigeria’s creditworthiness identified when the outlook on the sovereign’s rating was changed to negative in December 2019,” said Samar Maziad, a vice president at Moody’s.
“However, those risks have increased since then, exacerbated by the oil price shock and the financial and economic implications of the coronavirus outbreak,” Maziad said.
Although Nigeria dodged a downgrade from Moody’s, the verdict of the ratings agency is unlikely to inspire confidence in the economy, analysts say.
The rapid and widening spread of the coronavirus outbreak and related price shocks are creating an unprecedented credit shock across a wide range of regions and markets.
For Nigeria, these shocks amplify existing credit vulnerabilities both over the immediate and longer term.
In the near term, the significant drop in oil revenues will reduce an already extremely low tax base, undermining fiscal strength.
Combined with possible capital outflows, pressure on the fragile balance of payments may intensify, threatening external stability, according to Moody’s.