LCCI tasks FG on blocking leakages, as rating agencies cite sovereign risk concerns

The Lagos Chamber of Commerce and Industry (LCCI) has tasked the Federal Government to close leakages to boost revenues, while raising debt quality to reduce interest payment.

The Director-General, LCCI, Dr Chinyere Almona, gave the charge while expressing concerns over the recent downgrade of Nigeria’s sovereign risk profile by three global risk agencies, according to a statement.

Fitch 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 downgrade of the country’s risk outlook, while Standard and Poor’s placed its Eurobonds on watch list.
Almona noted that: “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.

Against this backdrop, LCCI demanded, “a commitment by the government to immediately expedite the attainment of the following positive outcomes will allay the legitimate concerns expressed by the three global 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 admonished that “Rather than continue as if nothing has happened, the government of Nigeria 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 further argued that: “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.