By Merit Ibe
The Lagos Chamber of Commerce and Industry (LCCI) has expressed concern over the recent downgrade of Nigeria’s sovereign risk profile by three leading global default risk rating agencies, calling on the National Assembly to revise the financing thrusts of the budget proposals to emphasise equity financing and deemphasise debt financing.
Fitch had recently 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 placement of Nigeria’s Eurobonds on its watchlist.
In her reaction to the downgrade, Director General of the LCCI, Dr Chinyere Almona, noted that 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.
Rather than continue as if nothing had happened, Almona advised that the government needs to explicitly address the issues flagged by multiple global risk rating agencies and announce measures to de-escalate the risks arising from them.
She said a commitment by the government to immediately reduce revenue leakages; boost government revenue; raise debt quality to reduce interest payments; increase forex inflows through FDI; emphasize equity financing of the 2023 federal budget will allay the legitimate concerns expressed by the global rating agencies. In response to the warnings from the global risk rating agencies about Nigeria’s debt sustainability, she said the National Assembly should revise the financing thrusts of the 2023 budget proposals to emphasise equity financing and deemphasise 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, the DG urged 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.
