Moody’s Investors Service has commended plans by Asset Management Corporation of Nigeria, AMCON, to retire about a third of its $35billion bonds and refinance the rest by 2014.
AMCON is expected to issue a bond in December to refinance the banks “entire exposure” at an interest rate of about 6 percent over a 10-year period.
The Central Bank of Nigeria (CBN) is expected to invest N3.6 trillion in the bond.
Moody’s said this will boost the country’s creditworthiness and eliminate the government’s indirect exposure to private creditors, adding that economic growth in Nigeria is resilient.
The agency’s rating for Nigeria is BA3, three levels below investment grade but Moody’s recently noted that an upgrade of the rating is hindered by corruption, weak institutions and its vulnerability to oil price drops.
Moody’s investors service has raised concerns that Nigeria’s slow implementation of structural economic reforms is limiting the country’s chances of a credit-rating upgrade.
According to a statement released by the international rating agency, Nigeria’s economic growth is described as “resilient,” but it notes that any chance of an update from its BA3 rating, which is three levels below investment grade, is being hindered by corruption, weak institutions and vulnerability to oil price drops.
Analysts at Moody’s believe that Nigeria’s momentum for addressing challenging structural reforms has slowed, “most critical of which is the Petroleum Industry Bill said to be holding up significant foreign investment.”
Nigeria’s economy expanded an estimated 6.6 percent in the first quarter of the year, compared with 6.9 percent in the previous three months.
The International Finance Corporation (IFC), a member of the World Bank, plans to issue a $50 million bond, to support Nigeria’s capital market and increase access to finance in the country.
This brings IFC’s total committed portfolio in Nigeria to $1.1 billion, the largest country portfolio in Africa and the eighth-largest globally.
It’s the first Naira denominated bond to be issued by the IFC, targeted at investors who want to diversify their portfolio while investing in high-quality assets.
IFC bonds are rated Triple-A by Moody’s Investors Service and Standard & Poor’s.
Proceeds from the bond will be used to support IFC’s private sector development program.