Moody’s could cut Nigeria

Moody's Investors Service said it placed Nigeria's Ba3 government bond and issuer ratings on review for downgrade.

The purpose of the ratings review is for Moody's to assess the extent of the impact of the further fall in oil prices, which it expects to remain low for several years, on Nigeria's economic performance and government balance sheet in the coming years.

As part of the review, the agency will in particular assess the credibility and sustainability of the government's plans and their ability to mitigate the impact of the lower oil price on Nigeria's credit standing.

Nigeria is highly dependent on hydrocarbons to support economic growth and to finance government expenditure. Oil and gas account for over 90% of goods exports and these exports expressed in % of nominal GDP are estimated at roughly 17% of 2016 GDP, Moody’s said.

It also provides an estimated 40% of consolidated government revenues (but between 60% and 70% before the oil price shock).

Between September 2014 and September 2015, the oil price roughly halved. Since then, it has fallen a further 40%. Moody's recently revised its oil price assumptions for Brent to $33 per barrel in 2016 and $38 per barrel in 2017, rising thereafter to $48 by 2019.

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