Concurrently, Moody's has affirmed the B2 long-term local and foreign currency issuer ratings, the B2 foreign currency senior unsecured ratings, and the (P)B2 foreign currency senior unsecured MTN programme rating.
The new status of
Moody explained that the "increasing fragility of
"In particular, CBN advances are more expensive than debt-funded on the domestic capital market as the CBN applies a penalty rate on top of its monetary policy rate currently at 13.5 per cent.
"Moody's expects general government revenues to remain very low at around 8% of GDP until 2022, despite measures to such as the VAT rate increase to 7.5 per cent from five per cent in 2020. Consequently, debt affordability will remain weak, with general government interest payments at around 25 per cent of revenues in the next few years."
Moody's also projected
"This low growth environment makes achieving the government's objectives of job creation, improvement in social indicators, and fiscal consolidation via increased revenue collection highly challenging. The implementation of economic policies to sustainably boost real GDP growth would alleviate some of the negative credit pressures.
"However, the continuation of the current policy mix -- including the rationing of the supply of US dollars in the economy while suppressing part of the demand for foreign currency (via the list of items banned from accessing dollars from official channels, for example) - aimed at supporting domestic production and job creation over the long term, will constrain economic growth over the short to medium term."
Overall, given Moody's expectation that general government fiscal deficits are likely to remain around four per cent of GDP (50 per cent of revenues) and growth subdued over the coming years, rapid debt accumulation will continue. Moody's expects debt to GDP to reach N49 trillion by the end of 2021, or 27 per cent of GDP.
While still at moderate levels, debt has accumulated quickly over the last four years, almost tripling to an estimated
Vanguard
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