The Lagos Chamber of commerce and industry has expressed concerns over Nigeria’s deteriorating risk profile, following the recent downgrades of the country’s sovereign risk profile by three leading global default risk rating agencies.
The Director-General of LCCI, Dr Chinyere Almona in a statement issued on Monday and made available to The PUNCH, noted that the country may be heading towards deeper debt crises, going by the government’s revenue and expenditure framework for 2023.
She called on the government to explicitly address the issues flagged by multiple global risk rating agencies and announce measures to de-escalate the risks arising from them.
Fitch downgraded Nigeria’s long-term foreign currency debt Issuer Default Rating from ‘B’ to ‘B-, a few notches above 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.
According to LCCI, the rating agencies pinned Nigeria’s deteriorating risk profile down to “its 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.
The advocacy group noted, “The N20.5tn budget proposed to the National Assembly by the president for 2023 includes a deficit of N10.78tn, which is more than 50 per cent of the entire budget. The president has proposed that more borrowings will fund N10.5tn out of this deficit. 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.
“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 emphasise equity financing and deemphasise debt financing. Issuing equity at home and abroad by inviting foreign investors to invest in state-owned companies, government real estate portfolio.”
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