Moody’s: Legal challenges to Nigeria’s election outcome credit negative

Moody's Investors Service has warned that the ongoing legal challenges to the outcome of the Nigerian election pose credit negative consequences for the country. The delay in the formation of a functioning government that can effectively address Nigeria's pressing credit challenges could have detrimental effects on the nation's credit profile. Lucie Villa, Vice President, and Senior Credit Officer at Moody's shared insights on the post-election developments in Nigeria during a recent interview. Villa highlighted the potential impact of a protracted legal battle on Nigeria's ability to make key policy decisions and address fiscal pressures. Typically, there is a period of policy inertia before and after elections, hindering the government's ability to make significant decisions. This situation could exacerbate existing fiscal pressures and negatively affect Nigeria's sovereign credit profile. One of the major challenges facing Nigeria is the widening budget deficit, leading to scarcity and rising borrowing costs. Villa pointed out that the removal of oil subsidies could help alleviate some of these fiscal constraints. However, the political and social implications of such a move make it a challenging decision for the government. Additionally, Villa addressed the issue of oil production, noting that structural and cyclical factors have hindered Nigeria's ability to increase production levels. The rising interest rates further complicate the country's budget, with a significant portion of government spending allocated to interest payments. Villa emphasized the importance of diversifying revenue sources away from oil dependency to strengthen the government's financial position. While efforts are being made to address these challenges, Villa cautioned that significant progress in revenue diversification could take several years. Moody's assessment underscores the need for prompt and effective policy action to address Nigeria's fiscal pressures and enhance the country's credit profile. The resolution of legal challenges and the formation of a stable government are crucial steps towards ensuring economic stability and sustainable growth in Nigeria.