FBN Capital sees Nigeria reforms accelerating post elections

Long-stalled reforms may accelerate after Nigeria’s presidential elections due by February 2015, as the Federal Government is forced to act as a result of deteriorating fiscal position and unsustainable subsidies.

“The FGN’s transformation agenda is stuttering in the face of the strength of vested interests. Progress is greater where those interests are weaker (such as agriculture and power), and slower where they are stronger (such as the PIB and the wealth fund). After the election, however, we anticipate deregulation of the petrol price,” say FBN Capital analysts led by Gregory Kronsten, in a note released June 3.

Removing Nigeria’s fuel subsidies, which are “unsustainable and foment corruption,” according to suspended Central Bank of Nigeria governor, Sanusi Lamido Sanusi, and cost N1 trillion ($6.25bn) in 2013, would help beef up government revenues and ease pressure on the naira.

FBN Capital expects growth of 7.1 percent this year and 7.0 percent in 2015, underpinned by the non-oil sector as well as higher oil prices.

“While Nigeria is not an island protected from global headwinds, we feel that a firm oil price will compensate for the loss of significant production to leakages. The GDP rebasing had a marginal impact on growth rates,”Kronsten says.

Standard & Poor’s (S&P) placed Nigeria’s credit rating on negative outlook on March 27, on heightened political and institutional risks and oil theft and pipeline shutdowns, which cost the country $12 billion last year.

On the new CBN governor, Godwin Emefiele, FBN Capital says it expects his policies to be unchanged from Sanusi’s, saying “MPC’s tight stance over three years has delivered the objective of single-digit inflation. We see small token cuts in the policy rate but no softening on either the cash reserve requirement (CRR) for banks or the use of administrative measures in defence of the exchange rate.”

 

PATRICK ATUANYA