On Monday, Nigeria’s government bonds experienced a steep drop after Moody’s downgraded the country from B3 to Caa1 on Friday.
Moody’s warned that the government’s fiscal and debt situation would continue to worsen.
Dollar-denominated 2051 Eurobonds saw the most significant decrease, dropping over 2.6 cents in the dollar to 68.892 cents as per data from Tradeweb.
The review for downgrade focused on Nigeria’s fiscal and external position and the capacity of the government to address the ongoing deterioration – other than by alleviating the burden of its debt through any form of default, including debt exchanges or buy-backs.
Moody
Moody predicts that the interest payments on Nigeria’s debt will consume half of the government’s revenue shortly, compared to 35% in 2022.
Moody’s stated that default risk is low as long as there are no sudden and unforeseen circumstances or policy changes.
The debt-to-GDP ratio is projected to increase to 45%, from 34% in the previous year to 19% in 2019.
The IMF estimates that the country utilized 80% of its revenue to service its debt in the last year, which could reach 100%.
The finance minister recently said Nigeria’s debt trajectory is manageable and plans to reduce the debt-to-GDP ratio to 60% by 2023.
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