… projects economic growth rate of 1.5% in 2017
Standard& Poor’s Global Ratings has affirmed its B (Outlook: Stable) sovereign credit ratings on Nigeria, with a projection that the Nigerian economy will grow by 1.5 percent in 2017.
The decision to leave Nigeria’s credit ratings unchanged from the previous rating last September was influenced by improving oil prices and the relative calm in the Niger-delta where militants had sabotaged production volumes.
“After recession in 2016, we expect that increasing oil production and government capital expenditures will support Nigeria’s economic growth rates and export revenues over 2017-2020,” S&P said Friday, March 17.
Oil exports accounted for 82 percent (N6.9trn) of Nigeria’s total exports by value in 2016, according to data compiled by Businessday and sourced from the NBS.
“We are affirming our ratings on Nigeria at ‘B/B’. The stable outlook balances our assessment that the oil sector improvements will support economic growth, although external financing pressures remain.”
The global ratings agency had lowered Nigeria’s rating one level to B in September 2016, five levels below investment grade and in line with Kyrgyzstan and Angola. The outlook for Nigeria was also changed from negative to stable at that time.
“We expect Nigeria’s economy to achieve real GDP growth of 1.5 percent in 2017 and 3.4 percent on average over 2017 to 2020, supported by improvements in the oil sector and improved government budget execution under its recently released Economic Recovery and Growth Plan 2017 to 2020,” S&P noted.
It further estimates the country’s overall current account deficit at below 2.0 percent of GDP in 2016, compared with a previous forecast of 3.4 percent in September 2016, on the back of crude production and prices gain.
Brent crude prices inched up 0.02 percent on Friday to $51.75 per barrel, according to Bloomberg data.
S&P sees oil prices at $53 per barrel over 2017 to 2020, compared with $51/bbl at the time of its previous review in September.
The Federal Government’s peace talks in the Niger-Delta have also helped ease tensions in the oil-rich region where oil production was sabotaged by militant attacks.
Oil production has recovered to around 2 million barrels per day according to state-owned oil company, Nigerian National Petroleum Corporation (NNPC), while government targets 2.5 million barrels daily by 2020, as stated in the Economic Recovery and Growth Plan.
S&P further noted that it could raise ratings in the case of significantly higher economic growth prospects than its base case, marked improvements in external accounts, and an easing of foreign exchange controls on current and capital account transactions that enhances monetary flexibility.
It may also lower ratings “if we observe further deterioration of Nigeria’s fiscal or external accounts, or greater stress in the financial sector than we currently expect.”
Nigeria’s general government debt stock is also forecast to average 23 percent of GDP for 2017 to 2020, comparing favourably with peer countries’ ratios.
Already, in an effort to pull the Nigerian economy out of the current crunch, economic management leaders from the Central Bank of Nigeria (CBN) and the Ministries of Finance, Budget and National Planning as well as Trade and Investment, over the weekend, gathered in Abuja to harmonise their policy positions ahead of the Monetary Policy Committee tomorrow.
Speaking at the opening of the two-day Monetary Policy Committee (MPC) retreat at the CBN Corporate Headquarters in Abuja at the weekend, with the theme: “Pathway to Price Stability Conducive to Economic Growth,” the apex Bank Godwin Emefiele, CBN governor, under whose auspices the meeting was convened, reiterated the need for the country’s monetary and fiscal authorities to collaborate and harmonize standpoints so as to develop the economy rapidly.
Emefiele, who also chairs the Monetary Policy Committee, said the MPC Retreat, which for the first time had in attendance a large representation of the fiscal authorities, was coming at a period when the country faced serious economic challenges. He added that finding a sustainable solution required a broadened participation of colleagues from the fiscal side.
He said that the retreat, as a brainstorming session, would provide perspectives on certain Monetary Policy Committee decisions. He said it would also close the gap on the coordination between monetary and fiscal authorities to chart a common course and take decisions to develop the economy.
In his remarks at the brainstorming session, the Minister of Budget and National Planning, Udoma Udo Udoma, said both the monetary and fiscal Authorities had no choice but to work together to guarantee the country’s economic growth. He posited that the pathway to lower interest rate was to ensure monetary and fiscal authorities collaboration with the private sector.
Also speaking, the Minister of Finance, Kemi Adeosun, and her Industry, Trade and Investment counterpart, Okechukwu Enelamah both agreed that solving challenges facing the Nigerian economy required unconventional tactics.
Adeosun, while disclosing that there remained a huge number of unbanked Nigerians whose contributions to the economy are hardly captured, said the government must devise ways to bring them into the financial mainstream. She also hinted that, based on the current realities, the Federal Government would have to borrow more to meet its infrastructural obligation.
On his part, Enelamah emphasized the need for both monetary and fiscal authorities to ensure business, market and investor confidence, as well as policy integrity, in order to improve on the ease of doing business in Nigeria.
In her presentation entitled: “The Macroeconomic Trilemma and Monetary Policy in Nigeria,” the Deputy Governor, Economic Policy, Central of Bank of Nigeria (CBN), Sarah Alade said the onus of achieving the trilemma of low interest and exchange rates as well as low inflation should not entirely be the function of the monetary authority. Rather, she said it therefore necessitated the collaboration with fiscal authorities.
According to her, there was need for deliberate policies to ensure stability and engender growth in the economy.
