The World Bank has identified Nigeria and 14 other countries as having weak credit ratings for sovereign bonds. This is contained in its latest report, “The Great Reversal: Prospects, Risks, and Policies in International Development Association (IDA) Countries.”
Among IDA countries, 15 have weak credit ratings for sovereign bonds and the list includes Cameroon, Democratic Republic of Congo, Republic of Congo, Ethiopia, Ghana, Lao People’s Democratic Republic, Maldives, Mali, Mozambique, Niger, Nigeria, Pakistan, Solomon Islands, Sri Lanka, and Zambia, all classified as needing substantial support due to their lower income status.
The report read: It noted that synchronized interest rate hikes in many advanced economies in response to inflation have led to tighter global financing conditions. This shift has seen the median sovereign bond spread for IDA countries expand dramatically—from 4.7%-points in 2019 to a peak of 12.4%-points in May 2023, eventually settling at 7.8%-points by March 2024. These conditions have sidelined IDA countries with weak credit ratings from global capital markets, resulting in the longest bond issuance drought since the global recession in 2009.
“Elevated costs of borrowing have magnified debt challenges. The synchronized increases of policy interest rates in many advanced economies in response to high inflation led to much tighter global financing conditions—with significant increases in borrowing costs for IDA countries.
“The median sovereign bond spread (the difference between the yield on U.S. Treasury securities and what a country pays on an equivalent issuance) for IDA countries rose from 4.7 percentage points in 2019 to a peak of 12.4%-points in May 2023, before falling back to 7.8%-points in March 2024.
