Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Global Credit Research - 14 May 2013
New York, May 14, 2013 -- In a new report published today, Moody's Investors Service
says that Nigeria's Ba3 rating balances the economy's robust
growth prospects and the government's limited debt levels against
low per capita income, weak institutions, slow progress in
executing structural reforms, and an acute fiscal vulnerability
to adverse oil price shocks.
The rating agency's report is an annual update to the markets and does
not constitute a rating action.
Nigeria's USD260 billion economy is on track to overtake South Africa
as the largest economy in sub-Saharan Africa by 2020, with
growth momentum being generated by the non-oil --
primarily domestic service-oriented -- sector.
Consequently, Moody's observes that Nigeria's GDP growth
has been remarkably stable in the 6%-8% range,
with negligible sensitivity to the global downturn in 2007-08 and
the subsequent negative oil price shock.
Nigeria has a significant hydrocarbon endowment, with reserves currently
estimated to be around 37.2 billion barrels or around 28%
of total African reserves. Oil exports are essential to the economy
and account for over 85% of total merchandise exports and 60%-70%
of fiscal revenue. However, this dependence on oil exports
exposes the economy to global energy price volatility.
Moody's notes that investment in Nigeria has converged to the median
for Ba-rated sovereigns, following structural reforms and
macroeconomic stability that was achieved by 2010. Nigeria has
also been effective in attracting foreign direct investment relative to
both African and Ba-rated peers. However, despite
elevated levels of investment, the country continues to face a chronic
infrastructure deficit that weighs on productivity and competitiveness.
Nigeria's high growth is also offset by (1) low per capita GDP of
approximately USD1,500 (purchasing power parity), which is
below the median of USD4,200 for Ba-rated peers; (2)
a high incidence of poverty (over 60% of the population live below
the poverty line); and (3) a high unemployment rate, which
disproportionately affects the young (the official unemployment rate is
around 24% and rises to 37% for ages 15-24).
Core institutional deficiencies - a history of opaque economic
policymaking, a high incidence of corruption, and limited
political willingness and capacity to execute critical structural reforms
- anchor Nigeria's rating and exacerbate risks stemming from
weak economic fundamentals Macroeconomic policymaking has improved,
particularly in the area of inflation targeting and financial sector supervision;
however, consolidated budgeting and public financial management,
at both federal and state levels, remains opaque.
Moody's notes that momentum for addressing challenging structural
reforms has slowed. Most critically, legislation to revise
the fiscal regime in the petroleum industry and to deregulate the downstream
oil and gas sector has stalled, holding up significant foreign investment
while the sector's productivity declines.
With 65%-70% of government revenues sourced from
the oil sector, fiscal sensitivity to oil prices is high and the
government's mitigation strategies are a key ratings driver.
In their current form, Moody's views these fiscal buffers
as insufficient: savings of windfall oil revenues in the Excess
Crude Account's (ECA) have historically been volatile and discretionary
withdrawals from the fund by both federal and state levels of government
have undermined the ECA's credibility. Spending by the ECA
has often been pro-cyclical and precludes the expenditure consolidation
necessary to preserve fiscal buffers for a structural downturn in global
oil prices. In 2011, the ECA was ostensibly reformed and
replaced with the Nigerian Sovereign Investment Authority (NISA),
a more transparent sovereign wealth fund with explicit twin long-term
savings and stabilization mandates. However, to date,
Moody's notes that the NISA does not have an operational mandate
and has been seeded with only USD1 billion from the ECA.
These factors are partially offset by the Nigerian government's
significant fiscal space as a legacy of comprehensive debt relief in the
mid-2000s. With government debt below 20% of GDP,
Nigeria's fiscal metrics are superior to most Ba-rated peers.
Vulnerability to external shocks and volatile fiscal buffers are somewhat
offset by the stock of foreign-exchange reserves of USD47.4
billion in 2012. Nigeria also issued a benchmark USD500 million
dollar, 10-year bond in 2011 and Moody's expects the
government to seek additional funding in international capital markets
to finance the infrastructure deficit.
Moody's see elevated risks stemming from the confluence of a violent
nationwide Islamist insurgency and increased militant and criminal activity
in the oil-rich Niger delta. The sabotage of petroleum infrastructure
and theft has resulted in the loss of almost a quarter of Nigeria's
oil output. This violence has the potential to stall foreign investment
and is increasingly a fiscal drag on spending by state and local governments.
While Moody's does not believe Nigeria to be at a tipping point
wherein broad-based social unrest could destabilise the government,
political risks are amplified by the combination of rising poverty and
inequality, political disempowerment, entrenched religious
and ethnic tensions, and extraordinary levels of corruption.
Subscribers can access the report at: http://www.moodys.com/credit-ratings/Nigeria-Government-of-credit-rating-551435
NOTE TO JOURNALISTS ONLY: For more information, please call
one of our global press information hotlines: London +44-20-7772-5456,
New York +1-212-553-0376, Tokyo +813-5408-4110,
Hong Kong +852-3758-1350, Sydney +61-2-9270-8141,
Mexico City 001-888-779-5833, S?o Paulo
0800-891-2518, or Buenos Aires 0800-666-3506.
You can also email us at email@example.com or visit our
web site at www.moodys.com.
Asst Vice President - Analyst
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
VP - Senior Credit Officer
Sovereign Risk Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's: Nigeria's growth is resilient, but limited structural reforms constrain creditworthiness
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
© 2015 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND CREDIT RATINGS AND RESEARCH PUBLICATIONS PUBLISHED BY MOODY’S (“MOODY’S PUBLICATIONS”) MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL, FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS FOR RETAIL INVESTORS TO CONSIDER MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS IN MAKING ANY INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s Publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY SUCH RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for appraisal and rating services rendered by it fees ranging from $1,500 to approximately $2,500,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
For Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail clients. It would be dangerous for “retail clients” to make any investment decision based on MOODY’S credit rating. If in doubt you should contact your financial or other professional adviser.
For Japan only: MOODY'S Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of MOODY'S Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it fees ranging from JPY200,000 to approximately JPY350,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.