Thursday 24 April 2014     24 Jumada Al-Thani 1435
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Fitch ratings: Nigeria’ economy stable but stagnant

Fitch rating released yesterday said Nigeria’s rating remained where it was last year with indices showing stable but non-progressive economic outlook.   

It also affirmed Nigeria’s long-term foreign and local currency IDRs and unsecured bond ratings at ‘BB-’ and ‘BB’ respectively. The agency has also affirmed Nigeria’s short-term foreign currency IDR at ‘B’ and Country Ceiling at ‘BB-’.
These indices are similar to those released last year by the rating agencies which indicate stagnant economic growth.
“Nigeria’s ratings remain constrained by weak governance, low per capita income and vulnerability to oil price volatility. The government is responding to the Boko Haram insurgency mainly with security measures.
“Data weaknesses hamper the monitoring of economic and fiscal performance and reform progress,” the rating agency said. But the Coordinating Minister of the Economy and Minister of Finance Ngozi Okonjo Iweala described the report as positive development.
 “This confirms that Nigeria’s economy is resilient just like the Nigerian people are resilient.  What’s important about the ratings is that while acknowledging all the challenges the economy faces, it points to and applauds the strengths such as progress in the power sector, increased focus on agriculture, strong investment in local manufacturing and other areas”, the minister said in a statement through her spokesman Paul C Nwabuikwu.   
Other aspects of the report reflect the following key rating drivers:
GDP growth slowed to 6.4% in H113 “but has shown resilience in the face of exogenous shocks: severe floods in 2012 which hit agricultural output; security problems especially in the North earlier this year; and increased oil theft and vandalism and the consequent repair shutdowns which have caused oil output to contract for the second year in a row.
“The non-oil economy has slowed but still grew by 7.9% in 2012 and 7.6% in H113. Non-oil growth should pick-up in H213 as normal weather has resumed and the authorities have responded to security problems. Reforms to the electricity and agriculture sectors could start to boost potential growth.
“Inflation has been in single digits all year - the lowest in five years and the longest stretch of single digit inflation since 2008.
“Public finances remain comfortable. Fitch estimates a general government deficit of around 1.8% of GDP this year and next. Both oil and non-oil revenues are underbudget and the Excess Crude Account (ECA) has been tapped to compensate. Capital spending also remains under budget.”
The report further said: “The draft 2014 budget plans ambitious fiscal consolidation, with lower oil production and benchmark oil prices and lower spending than the 2013 budget.
However, Fitch expects that oil production will likely fall short again, and the final budget that emerges from the National Assembly is likely to be more expansionary. Nevertheless, Fitch expects general government debt to remain stable at just over 20% of GDP, barely half that of peers.