World Economy

Moody’s Says Nigerians Could Smile Again

Moody’s Says Nigerians Could Smile AgainMoody’s Says Nigerians Could Smile Again

One of the world’s leading credit rating agencies, Moody’s, has cheerful news for Nigerians in 2017.  It says the country’s economy and her dollar earnings are expected to improve in the new year.

The US-based top rating firm’s Vice President and Lead Analyst for Nigeria, Lucie Villa, said that Nigeria’s economy would bounce back to 2.5% in 2017 from its 1.5% contraction in 2016, naija247news reported.

Last July, the Minister of Finance Kemi Adeosun had said that Nigeria was “technically” in recession and that militant activities in the Niger Delta had affected government revenues. But Adeosun had also been upbeat about the chances of an economic improvement, saying, “We are going to come out of it and it would be a very short one because the policies that we have, would ensure that we don’t go below where we need to go.”

The minister’s positive outlook was also echoed by Villa who said, “We expect Nigeria’s economic growth to bounce back to 2.5% in 2017, supported by an ongoing recovery in oil production. The government’s balance sheet is strong, with debt at around 16.6% of gross domestic product in 2016. Also, despite its interest burden rising to 19.8% of revenue, Nigeria’s capital markets remain a reliable and captive source of liquidity and funding for the government.”

Villa’s optimistic outlook largely agreed with the projections in Moody’s latest report, released last December. In the report, which rates Nigeria’s economy B1 (stable), the agency noted that the “stable outlook” was supported by the strength of the country’s balance sheet. In 2017 and 2018, the credit rating agency said it expected Nigeria’s balance of payments to move back into surplus.

Moody’s, however, said Nigeria’s weak institutional framework, especially in terms of “the rule of law, government effectiveness and control of corruption,” would have a significant impact on its economic growth and fiscal strength, and thereby constrain the B1 rating.

“The country is still exposed to political risks arising from both the conflict with Boko Haram and recurrent attacks on oil infrastructures in the Niger Delta,” Villa added.

Moody’s also predicted that the federal government’s deficit would remain around 2% in 2017 and 2018.

Moody’s stated further that two-thirds of 2017 real growth would come from the oil sector rebound alone, with a strong base effect expected in the second and third quarters.

“Nigeria’s large hydrocarbons reserves remain a key credit support: it has an estimated 37 billion barrels of oil (about 28% of total African reserves) and nearly 34 billion of oil-equivalent in gas. Oil and gas exports tend to account for over 90% of goods exports and a significant share of fiscal revenue (60-70% prior to the current oil shock). Our current oil price forecast are $45 per barrel in 2017 and $50 in 2018, compared to prices above $100 on average between 2010 and 2014,” Moody’s said.

Nigerian experts expressed similar views about the economy in 2017. According to the economists, the recovery will be slow, but if government increases productivity and implements the budget, Nigerians will have reasons to smile again.

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