The Federal Government said on Thursday that it received Moody’s Investors Service’s report with shock. The international rating agency had downgraded nine Nigerian banks after its downward review of the country’s rating the previous week. Despite the government’s evidence of efforts to stabilise the economy, the report, according to officials, did not reflect a proper understanding of the domestic situation.
Finance Minister Zainab Ahmed addressed the issue at the 65th State House Ministerial Briefing, organised by the Presidential Communications Team at the Aso Rock Villa in Abuja. She said the downgrade “came as a surprise to us because we have presented all of the work that we’ve been doing to stabilise the economy,” adding that external rating agencies lack a full grasp of Nigeria’s internal environment.
Moody’s downgraded Access Bank Plc, Fidelity Bank Plc, First City Monument Bank Limited, First Bank of Nigeria Limited, Guaranty Trust Bank Limited, Sterling Bank Plc, Union Bank of Nigeria Plc, United Bank for Africa Plc and Zenith Bank Plc. In its statement, the agency also lowered the long‑term deposit ratings, issuer ratings and senior unsecured debt ratings (where applicable) of all nine lenders from B3 to Caa1. The outlook for these ratings was changed to stable.
The agency explained that the banks have significant direct and indirect exposure to the Nigerian sovereign, with sovereign debt holdings representing 28 % of their aggregate assets as of June 2022. Because the government’s rating was downgraded on 27 January 2023 to Caa1 from B3, Moody’s expects the fiscal and debt position to continue deteriorating, linking the banks’ credit profiles to the sovereign’s rating.
Following Moody’s downgrade, Nigeria’s government bonds experienced their fastest sell‑off in three months on Monday. Data from JPMorgan Chase & Co showed that the extra yield investors demand for Nigeria’s dollar debt rose by 49 basis points to 780 bps, even though Nigeria’s bonds had outperformed other African and emerging‑market issuers over the previous six months.
Minister Ahmed reiterated that the downgrade was unexpected given the government’s stabilisation measures. She noted that Moody’s cited practical concerns: the risk of a relapse in oil production, a high debt‑service‑to‑revenue ratio, and ongoing foreign‑exchange management problems that hinder industries from obtaining needed foreign currency. While Moody’s affirmed Nigeria’s capacity to service its debt, it flagged the high revenue burden as a risk.
The minister said the Federal Government looks forward to the upcoming S&P Global report, scheduled for release on Friday. “We have explained to them what we’re working on to address each of these three major challenges they reported,” Ahmed said, adding that S&P’s assessment differs from Moody’s.
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