The Lagos Chamber of Commerce and Industry (LCCI) expressed serious concern about the recent downgrades of Nigeria’s Sovereign Risk profile by three leading global default risk rating agencies and charged the Federal Government to immediately adopt strong policy measures to reverse Nigeria’s sliding ratings.
The Chamber recalled that Fitch downgraded Nigeria’s long-term foreign currency debt Issuer Default Rating (IDR) from ‘B’ to ‘B-, few notches above a junk status, after Moody’s downgrading Nigeria’s risk outlook, and Standard and Poor’s placement of Nigeria’s Eurobonds on its watch list.
The Director-General of the organized private sector (OPS) group, Dr. Chinyere Almona, in a statement on Sunday, noted that the rating agencies all linked Nigeria’s deteriorating risk profile down to weakening external and government finances, especially based on declining government revenues which cannot meet rising interest payments on debt; inadequate availability of foreign exchange; and heightened exchange rate uncertainty, all in the face of strong global oil prices.
The Chamber maintained that rather than continue as if nothing has happened, the Federal Government needed to frontally address the issues flagged by multiple global risk rating agencies and announce measures to de-escalate the risks arising from them.
The frontline OPS advocacy group expressed the hope that a commitment by the government to immediately expedite the attainment of the reducing revenue leakages, boost revenue generation, raise debt quality to reduce interest payments, increase foreign exchange (FX) inflows through foreign direct investment (FDI), and emphasize equity financing of the 2023 federal budget would allay the legitimate concerns expressed by the three global rating agencies and reposition the economy for improved performance.
The LCCI advocated on plugging of revenue leakages that the government should sustain ongoing conversations and efforts to curb oil theft, remove subsidies, reduce waivers, and unify multiple exchange rates to reduce revenue leakages.
Citing experiences in other countries like UAE and Saudi Arabia to justify its stance, the Chamber pointed out that to boost revenue generation, “government should complement ongoing efforts to generate more tax revenue through annual Finance Acts with parallel efforts to generate non-tax revenue from fees, rent, and other income from government assets through annual Investment Acts.”
The group also stated on raising debt quality to reduce interest payments, that Nigeria needed to increase the quality of its debt issues to bring down the issue rates on new debt issues, pointing out that the main problem with Nigeria’s debt is not the size but the cost.
It clarified: “The enduring solution to the inadequate availability of foreign exchange and heightened exchange rate uncertainty is to issue more cross-border equity. Nigeria’s strongest fiscal and financial point today is that it has not issued any equity at home and abroad in a long time, preferring to issue on debt in terms of treasury bills, FGN Bonds, and Eurobonds.”
The LCCI stated that looking at the government’s revenue and expenditure framework for 2023, there was concern about the risks of falling into deeper debt crises, adding that 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.
