Fitch’s Rating And Nigeria’s Economy

RECENTLY, a global analyst of national economies, Fitch Ratings, scored Nigeria’s long-term foreign and local currency with a ‘B’ rating, while it placed the nation’s Issuer Default Rating (IDR) and unsecured bond at ‘BB’. The group added that the nation’s economic policy had a stable outlook.
“The stable outlook reflects the fact that in Fitch’s view, upside and downside risks are well balanced,” the agency said.
According to Fitch, “The non-oil economy has slowed but still grew 7.9 per cent in 2012 and 7.6 per cent in the first half of 2013. Non-oil growth should pick-up in the second half of 2013 as normal weather has resumed and the authorities have responded to security problems.
“Reforms in the electricity and agriculture sectors could start to boost potential growth. Inflation has been in single-digit all year – the lowest in five years and the longest stretch of single-digit inflation since 2008. Policy rates are unchanged.
“Capital spending also remained under budget. The draft of 2014 budget plans ambitious fiscal consolidation, with lower oil production and benchmark oil prices and lower spending than the 2013 budget.”
The global rating agency also noted that Nigeria’s current economic performance was driven by the resilience of its Gross Domestic Product (GDP), growth in the face of external shocks, despite slowing down to 6.4 per cent in the first half of 2013.
The rating agency, however, expressed concern that vested interest will make structural reforms in Nigeria vulnerable to political exigency, which it called “a continued struggle, especially with the approaching general elections in 2015.”
Perhaps, the upward rating would have been higher but for the data weaknesses which the agency said hampered monitoring of economic and fiscal performance as well as reform progress in the country. Fitch also observed that Nigeria’s chances of rating upgrade were constrained by weak governance, low income per capita and exposure to oil price instability.
The agency seemed to have applied universal indices in its rating of the country. There seems evidence that in its rating of Nigeria, Fitch didn’t seem hounded or hypocritical, thus, making the agency’s position quite credible. “The main factors that individually or collectively might lead to rating action are as follows: continued structural reforms that brought faster, more diverse and inclusive growth and high employment and per capita incomes; long track record of low single-digit inflation; increased external buffers either in ECA or the new sovereign wealth Fund, improved governance as reflected in the World Bank and anticorruption indicators,” the agency said in its report.
It will be quite encouraging to note that, perhaps for the second time, global rating agencies are keen in result-oriented economic measures of Nigeria’s present administration vis-à-vis the fact that its economic measures or policy are yielding seen and felt results.
However, this is not the first era in which Nigeria applied economic measures assessed to have been good, having revamped certain poor economies. Structural Adjustment Programme as recommended by the World Bank was applied by the military government whose finance managers were of world class expertise but such measures failed to produce lasting result, because it did not endure as to be able to stabilize the economy.
This is where Fitch’s observation should be noted. The rating agency observed that “vested interest” may render structural reforms in the country volatile to partisanship. Apart from the federal level, most state government administrators in the country often reverse economic measures of their predecessors; not because such measures are bad but because the new administrators are of different political leanings. They begin a new programme, most times untested, that may take another long period of gestation; and such projected period had never been allowed to end before such measure is replaced with another measure. This has been one of the major reasons Nigeria has not grown economically for over 53 years.
The country has been a victim of constant electioneering fervour and misdemeanour, where opponents do not see anything good in the policy or measures of governments which they attempt to beat at elections. This is why Fitch made reference to 2015, another election year, when the praised economic measures may end if a new crop of managers take over.
‘Operation Feed the Nation’ which indeed was feeding Nigerians died three years of its formulation when ‘Green Revolution’ came in, but failed to see any green vegetation in the country.
We, therefore, sincerely call on the “vested interest” as expressed by Fitch to seek how to assist the present economic measures to grow in the interest of the entire nation.
However, it is unfortunate that income per capita is still low in the country as observed by the rating agency. It translates to micro poverty in the face of national wealth, which implies that sundry productivity is too low to effect the observed growth in GDP. Therefore, measures must be taken to improve small-scale industries. Most of them are either extinct or moribund given the hostile economic environment in the country.
It is also important that we call on the nation’s economic managers to always consider, first, domestic “interest” in all economic formulation and implementation, because Fitch might have known that many economies of most developing nations are largely praised when they are tailored to western “interest.”
Given that Fitch applauded government’s efforts to diversify the nation’s economic base, we also note that any economy that is not able to diversify cannot be said to be productive. Nigerians largely consume what others produce.
Therefore, time has come to pursue, with vigour, the noted measures capable of accelerating the development of the real and agriculture sectors. It is our view that every Nigerian must cooperate.
As we greet the country’s economic managers for a good performance, we enjoin them to continue to always think Nigeria first for the interest of Nigerians.