Moodys: Likelihood of a shock that will damage Nigeria’s economy is low

Moodys, a credit rating agency, says that the likelihood of a shock that will damage Nigeria’s economic and fiscal strength is low.

In a report titled ‘Government of Nigeria — B2 stable, Annual credit analysis’, the agency said the country’s credit profile is still constrained by the fact the government has not been able to expand its non-oil revenue base sufficiently.

“The sharp decline in oil prices from mid-2014 severely weakened its public finances. General government revenue halved to 5.6% of GDP in 2016 from 10.5% in 2014. Since late 2015, the authorities have stepped up their efforts to increase non-oil revenue,” a statement by the agency read.

“However, despite these efforts and even though oil prices have recovered to above the budgeted oil price, government revenue has mostly been below target and significantly below pre-crisis levels at around 6% of GDP.

“Increasing the non-oil tax take remains one of Nigeria’s greatest challenges. Only a durable increase in non-oil revenue will improve its resilience to oil price volatility and increase realisation rates of capital spending on the large infrastructure projects that are crucial to its economic development.

“The stable outlook on Nigeria’s sovereign rating reflects the low likelihood of a shock that further impairs Nigeria’s economic and fiscal strength. External vulnerabilities have receded, supported by a rebound in oil prices and production.”

According to Moodys, Nigeria ranks near the bottom of a number of international surveys assessing institutional strength and it is considered weaker to its peers in respect of rule of law, government effectiveness and control of corruption.