Naira devaluation, subsidy removal excite Moody’s, upgrades Nigeria’s credit outlook to positive

The possible reversal of the deterioration in Nigeria’s fiscal and external position as a result of the government’s reform effort has spurred global rating agency, Moody’s Investors Service (Moody’s) which has moved Nigeria’s credit outlook from stable to positive.

This development was announced by the credit rating firm in a statement on Friday, December 8, 2023.

Moody’s pointed out government steps, such as devaluing the naira and removing a substantial part of the oil subsidy as key indicators for the upgrade from stable to positive.

“The positive outlook reflects the possible reversal of the deterioration in Nigeria’s fiscal and external position as a result of the authorities’ reform efforts,” wrote analysts Lucie Villa and Matt Robinson.

Meanwhile, the international firm maintains the country’s long-term issuer ratings at Caa1, noting that the structural reforms are undercut by still “weak fiscal and external positions.”.

READ ALSO:Moody’s downgrades Nigerian banks’ rating

The review for the upgrade in credit outlook primarily emphasized a reversal in the economic projection of the country. It also indicated that President Tinubu’s reforms may have begun to have a positive impact on the economy.

Nevertheless, Moody’s maintaining the country’s rating at Caa1 shows that the nation’s credit profile is still weak.

Nigeria’s fiscal and external standings, along with the government’s ability to counter the ongoing deterioration in the foreign exchange market add to the profiling.

Nigeria still grapples with an almost two-decade inflation rate standing at 27.33%. Food inflation, on the other hand, is at an alarming 31.52% amid other worrying indices.

Nigeria is expected to spend at least six times more on servicing it.

By Babajide Okeowo

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