S & P warns that Nigeria’s economy is in “clear danger”

International rating agency, Standard & Poor’s, yesterday, warned that Nigeria’s economy is in a “clear and present danger,” even as data released by the National Bureau of Statistics, NBS, revealed that Nigeria earned N12.8 trillion from crude oil export in 2014.

The rating agency, in a presentation by Konrad Reuss, Regional Manager, sub-Saharan Africa, put Nigeria on a negative sovereign ratings watch, BB minus.

According to Reuss, the factors putting the Nigerian economy in danger include the Boko Haram insurgency, the fall in oil prices, because of the importance of oil for government and export revenues, as well as the forthcoming elections.

Reuss explained that Standard & Poor’s rated Nigeria based on its six main categories and found out that Nigeria was weak in three classifications, namely: institutional and governance effectiveness, economic structure and growth, fiscal flexibility and performance.

In addition, Reuss who was addressing a seminar on Nigeria in Sandton, north of Johannesburg, said Nigeria was classified as neutral in external liquidity and international investment position and monetary flexibility, while its only area of strength was in its debt burden.

Reuss explained that the reason economic structure and growth was identified as a weakness was because of weakness in the structure of the economy and not the country’s growth rate, adding that the structural problems were not being offset by the good growth.

Despite the uncertainty over the forthcoming elections, Reuss, however, cautioned that elections did not automatically deliver bad results, adding that they could deliver good ones.

He said: “Despite these concerns, Nigeria remained in the middle of the sovereign ratings rankings for Africa. Notwithstanding the negative watch, I like Nigeria, it is a diversified economy. It has an interesting private sector.

“Ratings are really about credit-worthiness. If we did downgrade Nigeria, it would have little effect on its borrowing.

“It would be more an issue of the country’s image. From a debt perspective, even if there was a downgrade, Nigeria would still look solid.”

Credit: Michael Eboh/Vanguard