Moody’s said the move by CBN will help boost the economy, which recently has slumped into recession.
A global credit rating agency, Moody’s has given the Central Bank of Nigeria (CBN), following the apex bank’s decision to devalue the Naira.
Moody’s said the move by CBN will help boost the economy, which recently has slumped into recession.
The credit rating agency also predicted that Nigeria will get out of recession in 2017.
The VP-Senior credit officer at Moody’s, Aurelien Mali also said “We expect that Nigeria will contain pressures on its public finances in the short term. However, there is greater doubt about the severity of the impact of these challenges, particularly on government liquidity and economic growth, over the medium term.”
According to the credit rating agency’s report titled: Government of Nigeria: FAQ on Credit Implications of Naira Depreciation, Low Oil Price and Broader Economic Challenges, states and local governments will benefit from the Naira devaluation.
An excerpt of the report obtained from The Cable reads: “Overall, Moody’s views the recent devaluation of the naira as credit positive. The new system should enable the naira to better absorb external shocks over time, and dollar availability should gradually increase.
“However, the depreciation implies a material loss in purchasing power given import-price inflation. Moody’s expects inflation to accelerate to 18% by year’s end, before falling to an average of 12.5% in 2017 (based on the recent 2 percentage point hike in the central bank’s policy rate to 14%).
“Moreover, the fiscal benefit of the depreciation and the current oil price (which is above the budgeted oil price) exceeds the loss in oil output.
“States and local governments will benefit from the naira depreciation, offsetting the negative impact on oil production from the recent attacks in the Niger Delta. Moody’s expects authorities to reduce spending if revenues underperform.”
Moody’s Corporation is the parent company of Moody’s Investors Service, which provides credit ratings and research covering debt instruments and securities.
Chika Ebuzor I Pulse
