Nigeria’s dollar-denominated government bonds declined on Friday ahead of a review of its credit rating by S&P Global.
The decline is coming around the same time the country was downgraded by another rating agency, Moody’s.
According to a Reuters report obtained by Nairametrics, Nigeria’s bonds dropped as much as 2.659 cents in the dollar, with the 2038 maturity falling the most, down to 69.189 cents, according to Tradeweb data.
The bonds fall: The bonds had fallen for two days in a row thanks to a combination of global risk-off sentiment and Moody’s downgrade, with the 2038 maturity’s price falling as low as 68.528 cents. It then recovered to as high as 73.375 cents before Friday’s drop.
Nigeria’s finance minister, Zainab Ahmed had on Thursday said that she disagreed with what she called a “surprise” downgrade of the country’s credit rating by Moody’s. She insisted that the government was already addressing the agency’s concerns.
Last week, Moody’s downgraded Nigeria to Caa1 from B3, saying the government’s fiscal and debt position was expected to keep deteriorating, an announcement that sent Nigeria’s dollar-bond and currency forwards tumbling.
Minister’s downgrade reaction: Reacting, Ahmed said, “Moody’s downgrade came as a surprise to us because we had presented all the work that we have been doing to stabilize the economy,” the minister, Zainab Ahmed, told reporters in Abuja.
- “But these are external rating agencies that don’t have the full understanding of what is happening in our domestic environment.
- The minister said she expected S&P’s rating, due on Friday, would be more positive.
- “S&P’s assessment is not the same as Moody’s. They have come out with a much better assessment,” she said.
Back story: The downgrade affects the long-term deposit ratings, issuer ratings as well as the senior unsecured debt ratings (where applicable), of all the Moody’s rated banks in Nigeria.
- At the same time, Moody’s has changed the outlook to stable on the long-term deposit ratings, issuer ratings as well as senior unsecured debt ratings (where applicable) of the nine rated Nigerian banks.
- This latest rating follows Moody’s downgrade on 27 January 2023 of the long-term issuer rating of the Government of Nigeria to Caa1 from B3 and a change in the outlook to stable.
- This action concludes the review initiated on 13 October 2022 and extended on 25 October 2022.
