A global rating agency, Fitch, has cut its 2017 economic growth forecast for Nigeria to one per cent from 1.5 per cent.
The Nigerian economy had returned to growth in the second quarter of 2017 after shrinking by 1.5 per cent in 2016, but the recovery has been fragile because oil revenues remain depressed and hard currency is short.
Speaking at a Fitch event in London, the Director for Sovereigns, Jermaine Leonard, said although Nigeria’s 2018 budget had an oil production target of 2.3 million barrels per day, the Fitch forecast was just above two million barrels,Reuters reported on Friday.
Partly, this was linked to a potential flare up in violence in the Niger Delta as elections approach in 2019, he said.
“But at this point, we are cautiously optimistic,” he added.
The Federal Government is moving ahead with plans to borrow $5.5bn from foreign investors aiming to plug a large gap in Nigeria’s finances that stem in part from the global fall in oil prices.
Equity markets are also buoyant, having hit three-year highs this week for 2017 gains of around 45 per cent.
Meanwhile, barely one month after one of the global rating agencies, Moody’s Investors Service, downgraded Nigeria’s sovereign debt rating, the agency said on Monday that the country’s balance sheet remained exposed to further shocks.
Moody’s had on November 8 downgraded Nigeria’s long-term issuer and senior unsecured debt rating to ‘B2’ from ‘B1’. The Federal Government, however, rejected the rating.
The Vice-President/Senior Credit Officer, and co-author of the report, Aurélien Mali, was quoted as saying, “Only a durable increase in non-oil revenue will improve Nigeria’s resilience to oil price volatility and increase the realisation rates of capital spending on the large infrastructure projects that are crucial for Nigeria’s economic development.
“Until it does, the government’s balance sheet will remain exposed to further shocks. Deficits will remain elevated and debt affordability will remain challenged.
“This exposure will persist, despite recent improvements in the economy, which are primarily cyclical and related to the strengthening of the oil sector.”
According to Moody’s, Nigeria’s economy continues to adjust to the loss of more than 50 per cent of its foreign currency earnings.