After presenting a somewhat ‘all will be well and dandy’ budget for 2018, Moody’s has cut Nigeria’s credit rating to B2.
The ratings agency had placed Nigeria at B1 in its previous opinion and the further downgrade means there are more concerns for Nigeria going forward on its ability to meet up with its debt obligations.
Moody’s said while Nigeria’s debt levels are not far off from a controllable threshold, Nigeria is exposed to further economic or financial shocks.
This conclusion might be spot on given a likely resurgence in militant activities in Nigeria’s oil-rich Niger Delta.
Last week, Niger Delta Avengers, self-styled but the highly-destructive militant group said it has called off its ceasefire in the Niger Delta and it will in no time resume the wanton destruction of oil installations in the region.
Analysts in the oil markets are of the opinion that Nigeria’s federal government has not also shown its seriousness in tackling the matter by engaging in swift negotiations and solving the matter from its root cause.
Yesterday, Nigeria’s President Muhammadu Buhari delivered the 2018 budget presentation where he projected that the country is targeting at reducing inflation to 12.4% for the year while total revenue is projected at USD167 billion while the total budget was estimated at USD222 billion. This leaves a room for a budget deficit that will require domestic and foreign borrowing.
The fact that the above budget is predicated on a continuous steadiness in oil production which accounts for 40% of the country’s revenue means Nigeria is exposed to a serious risk should militants resume hostilities in the oil region.
At the international market, oil is on a bullish trend as US-Iran sanctions shows a resurgence while King Salman of Saudi kicked-off an anti-corruption drive that sent shockwaves throughout the market.
Should Nigeria witness another breakdown in oil production, analysts are predicting a return to negative gross domestic product and a likelihood of a double-dip inflation in the offing.