The Federal Government has been given the responsibility by the Lagos Chamber of Commerce and Industry (LCCI) to plug income leaks while improving debt quality to lower interest costs.
According to a statement, Dr. Chinyere Almona, Director-General of the LCCI, delivered the address while expressing worry over the recent downgrading of Nigeria’s sovereign risk profile by three international risk agencies.
Following Moody’s downgrading of the nation’s risk outlook, Fitch lowered Nigeria’s long-term foreign currency debt Issuer Default Rating (IDR) from “B” to “B-,” just a few notches above junk status, while Standard & Poor’s added its Eurobonds to a watch list.
Almona made a note of: “The rating agencies all pinned Nigeria’s deteriorating risk profile down to weakening external and government finances, especially, the fact 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.
In light of this, LCCI urged the government to “promise to hasten the achievement of the following good outcomes in an expedient manner in order to relieve the reasonable concerns raised by the three major rating agencies.”
The positive outcomes include: “Reduce revenue leakages; boost government revenue; raise debt quality to reduce interest payments; increase foreign exchange inflows through foreign direct investment (FDI); and emphasise equity financing of the 2023 Federal Budget.”
The Chamber also urged Nigeria’s government to “explicitly address the issues raised by various global risk rating agencies and declare measures to de-escalate the risks emerging from them” rather than “proceed as if nothing has happened.”
She continued by stating: “The main problem with Nigeria’s debt is not the size but the cost. Malaysia’s debt stock of $225 billion is more than twice Nigeria’s debt of $100 billion, but the average interest rate on Malaysia’s debt is less than half of the average of 12 per cent that Nigeria spends on lower debt stock. Saudi Arabia also owes more than $260 billion but enjoys an average interest rate that is also less than half of Nigeria’s.”
“The difference between Nigeria and these countries is that they issue higher quality debt that attracts investment grade ratings from the same global risk rating agencies that are currently downgrading Nigeria’s risk profile towards a junk issuer status.”
“With every sense of responsibility and precaution, we urge 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,” she added.
