Business
Moody’s Downgrades Britain From AAA
Rating agency Moody’s stripped the United Kingdom of its AAA credit rating on Friday, making
it the latest European country to face a downgrade amid the continent’s grim growth prospects.
reports the CNN.
The UK was knocked down one notch to Aa1, with its ratings outlook at stable. Moody’s said the
key drivers of the downgrade included the country’s rising debt burden and tepid growth_outlook
over the next few years.
“Although the UK’s debt-servicing capacity remains very strong and very capable of withstanding further adverse economic and financial shocks, it does not at present possess the extraordinary resilience common to other AAA-rated issuers,” Moody’s said.
The UK had held AAA status since Moody’s first began rating the country in 1978.
In December, the UK’s budget monitor projected that the country’s economy would grow by just 1.3% this year. The government has been pushing a much-criticised austerity program, and finance minister George Osbourne said he remained committed to those efforts, even after the downgrade.
“This is a stark reminder of the debt problems that Britain faces and the clearest possible warning
to anyone who thinks we can run away from dealing with those problems,” he said. “Far from weakening our resolve to deal with our debts, this should redouble our resolve.”
The British government has said its belt-tightening will have to continue until 2018.
In announcing the downgrade, Moody’s said it expects the UK’s debt to peak at 96% of GDP in 2016, up from around 90% today.
A year ago, Moody’s switched the outlook on the UK’s AAA rating to negative, in a prelude to
Friday’s downgrade. At the same time, the firm cut the ratings of half a dozen European countries.
The other major rating agencies, Fitch and Standard & Poor’s, still have the UK rated AAA, though with negative outlooks.
Elsewhere in Europe, France lost its AAA rating from Moody’s in November, after a similar
downgrade from S&P in January.
The United States maintains its AAA rating from Moody’s and Fitch, though it was downgraded
by S&P in August 2011 following the debt ceiling standoff in Washington.
Steven Englander, a foreign exchange strategist with Citigroup, said in a research note following
the downgrade that the move was unlikely to raise borrowing costs for the UK, as bond yields
in the United States, France and Japan had remained stable following similar downgrades. But it
increases pressure on the country to pursue growth by weakening the pound, he added.
“While by itself the announcement merely accelerates what was expected to happen at some
point, the need for weakness (in the British pound) will become more apparent to policymakers
and investors,” Englander said.
Among Europe’s other major economies, Germany, Switzerland and the Netherlands maintain
their AAA ratings from Moody’s. France sits at Aal, while Italy is down at Baa2 with Spain at
Baa3.
Edun made the call while speaking at the 2025 Fellowship Investiture of the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, where he reaffirmed the federal government’s commitment to sustaining ongoing reforms and expanding access to finance as key drivers of economic growth beyond four per cent.
“We all know that monetary policy under Cardoso has stabilised the financial system in a most commendable way. Of course, it is a team effort, and those eye-watering interest rates have to be paid by the fiscal side. But the fight against inflation is one we all have to participate in,” he said.
The minister stressed the need for banks to broaden credit access and finance innovation-driven enterprises that can create jobs for young Nigerians.
“The finance and banking industry has more work to do because we must finance their ideas, deepen the capital and credit markets down to SMEs. They should not have to go to Silicon Valley,” he said.
The minister who described the private sector as the engine of growth, said the government’s reform agenda aims to create an enabling environment where businesses can thrive, access funding, and contribute meaningfully to job creation.
The facility, known as the Nigeria Actions for Investment and Jobs Acceleration (P512892), is a Development Policy Financing (DPF) operation scheduled for World Bank Board consideration on December 16, 2025.
According to the Bank’s concept note , the financing would comprise $500m in International Development Association (IDA) credit and $500m in International Bank for Reconstruction and Development (IBRD) loan.
If approved, it would be the second-largest single loan Nigeria has received from the World Bank under President Bola Tinubu’s administration, following the $1.5 billion facility granted in June 2024 under the Reforms for Economic Stabilisation to Enable Transformation (RESET) initiative.
The World Bank said the new programme aims to support Nigeria’s shift from short-term macroeconomic stabilisation to sustainable, private sector–led growth.
“The proposed Development Policy Financing (DPF) supports Nigeria’s pivot from stabilization to inclusive growth and job creation. Structured as a two-tranche standalone operation of US$1.0 billion (US$500 million IDA credit and US$500 million IBRD loan), it seeks to catalyse private sector–led investment by expanding access to credit, deepening capital markets and digital services, easing inflationary pressures, and promoting export diversification,” the document read.
The document further stated that Nigeria’s private sector credit-to-GDP ratio stood at only 21.3 per cent in 2024, significantly below that of emerging-market peers, while capital markets remain shallow, with sovereign securities dominating the bond market.
To address these weaknesses, the DPF will support the implementation of the Investment and Securities Act 2025, operationalisation of credit-enhancement facilities, and introduction of a comprehensive Central Bank of Nigeria rulebook to strengthen risk-based regulation and consumer protection.
The operation also includes measures to deepen digital inclusion through the passage of the National Digital Economy and E-Governance Bill 2025, which will establish a legal framework for electronic transactions, authentication services, and digital records.
Beyond the financial and digital sectors, the programme targets reforms to lower production and living costs by tackling Nigeria’s restrictive trade regime. High tariffs and import bans have long driven up consumer prices and constrained competitiveness, particularly for manufacturers and farmers.
Under the proposed reforms, Nigeria would adopt AfCFTA tariff concessions, rationalise import restrictions, and simplify agricultural seed certification to increase the supply of high-quality varieties for maize, rice, and soybeans. The World Bank projects that these measures will help reduce food inflation, attract private investment, and enhance export potential.
The operation is part of a broader World Bank FY26 package that includes three complementary projects—Fostering Inclusive Finance for MSMEs (FINCLUDE), Building Resilient Digital Infrastructure for Growth (BRIDGE), and Nigeria Sustainable Agricultural Value-Chains for Growth (AGROW)—all focused on expanding access to finance, strengthening institutions, and mobilising private capital.
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