It, however, projected a stable outlook for the country’s economy.
Moody’s said its expectation that the government’s fiscal and debt position would continue to deteriorate was the main driver behind the rating downgrade. According to Moody’s, the government faces wide-ranging fiscal pressure while the capacity to respond remains constrained by Nigeria’s long-standing institutional weaknesses and social challenges.
The report also pointed out that the government’s lack of access to external funding sources would add to the external pressure from depressed oil production and capital outflows, thereby eroding Nigeria’s external profile over time. “The LC country ceiling at B2 remains two notches above the sovereign issuer rating, incorporating some degree of unpredictability of government actions, political risk and the reliance on a single revenue source. The FC country ceiling at Caa1 remains two notches below the LC country ceiling, reflecting significant transfer and convertibility risks are given the track record of imposition of capital controls in times of low oil prices or falling oil production,” the report added.
According to Moody’s, a post-election policy response is likely to take some time to put Nigeria’s fiscal position on a more sustainable path.
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