Fitch Ratings, one of the world’s leading credit rating agencies, has uplifting news for Nigerians just a day into 2018.
The agency said the country was not expected to experience another economic recession in the New Year.
After Nigeria had endured a gruelling economic recession in 2016 with its attendant impacts felt in 2017, the United Kingdom-based rating agency said that forecast growth for the country in 2018 would be 2.6 per cent.
The projection is a bit higher than the 2.1 per cent growth projected for Nigeria’s economy by the International Monetary Fund in 2018 while the World Bank had, this year, projected that the Nigerian economy would grow at one per cent in 2018.
“Fitch Ratings forecasts growth of 2.6 per cent in 2018. The recovery will be driven mainly by increased FX (foreign exchange) availability to the non-oil economy and fiscal stimulus, as higher oil revenue and various funding initiatives have raised the government’s ability to execute capital spending plans,” the spokesperson for Fitch, Peter Fitzpatrick, said.
He, however, noted that the growth forecast was subject to downside risks, as the foreign exchange market “remains far from being fully transparent and domestic liquidity has also become a constraint.”
In its latest full report on Nigeria, Fitch said a revival of economic growth by the sustained implementation of coherent macroeconomic policies could lead to a positive rating for Nigeria while a failure to realise an improvement in the economic growth would be negative for the country.
At $344bn in 2017, Nigeria is considered to have Africa’s largest economy with oil only accounting for an average of 12 per cent GDP between 2011 and 2015.
Touching on Nigeria’s public finances, the London-based agency pointed out that the failure of the Federal Government to narrow the fiscal deficit, “leading to a marked increase in public debt”, would be negative for the government.
Therefore, Fitch said it expected higher revenues to drive “a narrowing” of the general government deficit to 3.4 per cent in 2018 as oil production rises and the overall economy recovers.
According to the rating firm’s baseline projections, the GGGD (gross general government debt) will continue to rise to 29 per cent of GDP in 2026.
Explaining further, the agency stated that the main risk to debt sustainability would be a failure to reduce the primary budget deficit, which could bring the debt level to 45 per cent of GDP over the same period.
Speaking on the impact that a delay in approval of the 2018 appropriation bill will have on the economy in the 2018, Fitch said, “The government has again faced delays in getting parliamentary approval for the budget, with much of the delay coming from legislators seeking more spending in their respective states.
“This will remain an obstacle to a smooth budgeting cycle as the next general election in 2019 approaches and members of the National Assembly focus more on shoring up their own regional political bases.
