Moody’s explains why Nigeria has low growth rate

International rating agency, Moody’s said Nigeria’s credit profile currently at B2 stable is constrained by the sovereign balance sheet’s continued exposure to shocks because the government has been unable to expand its non-oil revenue base sufficiently.

Moody’s in a report noted that only a durable increase in Nigeria’s non-oil revenue will improve its resilience to oil price volatility and increase realisation rates of capital spending on the large infrastructure projects that are crucial to its economic development.

According to Aurélien Mali, Moody’s Vice President, Senior Credit Officer and co-author of the report, until it does, the government’s balance sheet will be exposed to further shocks, while deficits will remain elevated and debt affordability challenged.

“Although oil revenue has risen in 2018, deficits remain elevated relative to revenue and debt affordability is still weak but improving, we expect debt levels to remain contained at around 20% of GDP in 2019.”

It identified Nigeria’s credit strength to include the large size of the economy and the country’s robust medium-term growth prospects supported by strong domestic demand.

Moody explained that the sharp decline in oil prices from mid-2014 severely weakened Nigeria’s public finances as general government revenue halved to 5.6% of GDP in 2016 from 10.5% in 2014.

It further noted that the stable outlook on Nigeria’s sovereign rating reflects the low likelihood of a shock that further impairs Nigeria’s economic and fiscal strength. External vulnerabilities have receded, supported by a rebound in oil prices and production.

In recently released figures, Nigeria’s economy expanded by 1.81 per cent in the third quarter of the year and it is tipped by the IMF grow 2 per cent by year-end compared to 0.8 per cent in 2017 and -1.6 per cent in 2016.

Previous Downgrade by Moody

Recall that Moody last year downgraded Nigeria, the Government long-term issuer and senior unsecured debt rating to B2 from B1 with a stable outlook. The downgrade means the government may need to pay slightly higher interest rates whenever it seeks to borrow from foreign investors. Although this does not dissuade foreign investors from investing in Nigeria.

Moody’s, is the bond credit rating business of Moody’s Corporation. Moody’s Investors Service provides international financial research on bonds issued by commercial and government entities.

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Fikayo has a degree in computer science with economics from Obafemi Awolowo University. ITIL v3 in IT service management. An alumnus of Daystar Leadership Academy. Prior to joining Nairametrics had stinct in Project management, Telecommunications among others. Also training in Consulting and Investment banking from Edubridge Academy. He has very keen interest in Politics, Agri-business, private equity and global economics. He loves travelling and watching football. You can contact him via


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