Moody’s Positive Ratings To Lower Nigeria’s Borrowing Costs – Analysts

Following the upgrade by Moody’s Ratings which changed Nigeria’s outlook to positive from stable and affirmed the country’s B3 long-term foreign currency and local currency issuer ratings, analysts has said it is good development that would see the country’s borrowing costs decline in the near future.

This is as the federal government has welcomed the ratings upgrade by Moody’s saying it reflects the tangible impact of its macroeconomic and fiscal reform agenda over the past three years, adding that the government will continue its reforms to ensure the stability.

Describing the news of the upgrade in the wake of the reclassification of the country as a frontier market by FSTE Russell, as in indication of that the reforms of the present government was working, the analysts said it was one that was expected.

Speaking with LEADERSHIP, head of Financial Institutions rations at Agusto & CO, Ayokunle Olubunmi, while noting that the reports had been expected, said “this week has actually been good for us, considering that during the week, Nigeria was added to the FSTE Russell frontier market. This shows the impact of the ongoing reforms that we’ve had since 2023.

It is actually a good one. It will help in reducing borrowing costs. So if Nigeria wants to issue debt instruments, it will make the country attractive to investors. It also helps the foreign investors to have a better perspective of the country and should gradually be resulting into some foreign direct investment, so that one can also even support it. Also, it should also help us.

On his part, Professor of Law and developmental economist, Prof. Tayo Bello, stressed the need for the government to keep up with the current economic tempo which have earned the country the upgrade, saying this may see the country getting into the league of country with A ratings.

“If we maintain the tempo, there is a possibility, and the possibility is that it will definitely have a positive impact on people. The domestic economy will improve, and even the bilateral relationship with other countries will improve and stabilise.

“What benefit would it be to the common man or to the citizens? Where you have what we call historical discipline, definitely, the economy will be moving towards stability, and it will create sufficient certainty that you can predict what will happen. That is in the long run.

“The short run is what we have just seen. There are a lot of countries that sit on AAA. Countries like Australia, Canada, Denmark, Germany and Norway are all ranked on AAA. We are just B3, and from there, if we can move from B to A, definitely we rank pari passu with the countries concerned.” The Professor noted.

On how the upgrade translates to the lives of the ordinary Nigerians, Olubunmi of Agusto & CO explained that the news would signal to not only portfolio investors but also foreing direct investors that the country is in a better position to support investments.

“Foreign direct investment has to do with people bringing in money, establishing businesses. When they bring their money, establish businesses, or invest in existing businesses, if they invest in existing businesses, that business will expand, employ more people.

“This create more activities in the economy, such that the ordinary man, the person that is not employed before, gets a job, or your friends get a job, or you have a company that has to supply something to that particular company.

These increases economic activities and s the economic increase in economic activity, income will also increase. Of course, government will add more revenue in terms of taxes, but the ordinary man, you see more activity in the economy, because what the ordinary man really needs is activities in the economy. That is how it trickles down and people actually feel the impact.”

Commenting, the Minister of Finance and Coordinating Minister of the Economy, Mr Taiwo Oyedele, in a statement said: “Moody’s positive outlook is an important external validation of the difficult but necessary reforms this administration has implemented, from removing a costly and inequitable fuel subsidy to unifying the exchange rate, and the landmark tax reforms.

“These decisions are restoring the fundamentals of macroeconomic stability: stronger reserves, a resilient external position, moderating inflation, and more credible policy transmission. Our medium-term ambition is to place Nigeria firmly on the path to investment grade. That will require us to sustain the external gains Moody’s has recognised, while making faster progress on domestic revenue mobilisation, spending efficiency, and debt affordability.

“We are committed to doing the work required to get there, not for the rating itself, but because the underlying reforms are what will lower Nigeria’s cost of capital, crowd in private investment, and deliver shared prosperity for Nigerians.”

The Ministry reaffirmed its commitment to the reform priorities that underpin the country’s improving credit profile, including “deepening domestic revenue mobilisation through ongoing tax reform and administration improvements, sustaining disciplined, market-reflective, and transparent foreign exchange regime.

He said strengthening public debt management and improving debt affordability metrics, maintaining fiscal discipline in coordination with the subnational governments; and dvancing structural reforms to support non-oil growth and diversify government revenue.

The Ministry noted Moody’s guidance that a further rating upgrade could follow if the recent improvement in Nigeria’s external position is sustained, or if revenue reforms succeed in durably increasing government receipts, both of which remain central pillars of the administration’s economic strategy.