The Lagos Chamber has expressed gravely concern about the recent downgrades of Nigeria’s Sovereign Risk profile by three leading global default risk rating agencies.
Recall that Fitch downgraded Nigeria’s long-term foreign currency debt Issuer Default Rating (IDR) from ‘B’ to ‘B-, few notches above a junk status, following Moody’s lead in downgrading Nigeria’s risk outlook, and Standard and Poor’s placement of Nigeria’s Eurobonds on its watchlist.
The rating agencies all pinned Nigeria’s deteriorating risk profile down to weakening external and government finances, especially the facts that; declining government revenues are now falling short of rising interest payments on government debt; inadequate availability of foreign exchange, and ; heightened exchange rate uncertainty, all in the face of strong global oil prices.
In a statement, the Director General, Lagos Chamber of Commerce and Industry (LCCI), Dr. Chinyere Almona, said rather than continue as if nothing has happened, the Government of Nigeria needs to explicitly address the issues flagged by multiple global risk rating agencies and announce measures to de-escalate the risks arising from them.
According to her, a commitment by the Government to immediately expedite the attainment of Reduce Revenue Leakages, Boost Government Revenue, Raise Debt Quality to Reduce Interest Payments, Increase Forex Inflows through FDI and Emphasize Equity Financing of the 2023 Federal Budget will allay the legitimate concerns expressed by the three global rating agencies
Looking at the Government’s revenue and expenditure framework for 2023, The Chamber is also concerned about the risks of falling into deeper debt crises. The N20.5 trillion budget proposed to the National Assembly by the President for 2023 includes a deficit of a whopping N10.78 trillion, which is more than 50% of the entire budget. The President has proposed that more borrowings will fund N10.5 trillion out of these deficits. It will be insensitive to go ahead with the proposed borrowing after Nigeria’s debt sustainability has been red flagged by multiple global default risk rating agencies.
The statement read in part, “In response to the warnings from the global risk rating agencies about Nigeria’s debt sustainability, the National Assembly should revise the financing thrusts of the budget proposals to emphasize equity financing and deemphasize debt financing.
“Issuing equity at home and abroad (FDI) by inviting foreign investors to invest in state-owned companies, government real estate portfolio, and infrastructure sectors, the way we invited them to invest in LNG, telecoms, and pension sector, would be a better and more sustainable way of funding the deficits.
“With every sense of responsibility and precaution, we urge the Government to be more sensitive to the crisis indicators that are being pointed to by critical stakeholders and announce timely commitments to take required actions.”