In a new report, Moody’s, a rating agency, said Nigeria’s Ba3 rating balances the economy’s robust growth prospects and the government’s limited debt levels against low per capita income, weak institutions, slow progress in executing structural reforms, and an acute fiscal vulnerability to adverse oil price shocks.
The economy has expanded an average of 7 percent a year in the past four years and debt-to-GDP ratio, at less than 20 percent, is favourable. However, there is a noticeable slowdown and or resistance to sensible reforms needed to change the structure of the economy and boost jobs creation and growth to double-digit levels that will help ease the nation’s 24 percent unemployment and 60 percent poverty rate.
Oil exports are essential to the economy and account for over 85 percent of total merchandise exports and 60-70 percent of fiscal revenue. However, the Petroleum Industry Bill (PIB), which aims to reform the sector, has been stuck in parliament for the past four years. The Sovereign Wealth Fund (SWF), pushed by the Ministry of Finance, is opposed by the nation’s 36 state governors, as the depletion of the Excess Crude Account (ECA) set up to cushion the nation from adverse fall in oil prices continues apace.
In the capital markets, the recent rebound of equity prices on the Nigerian Stock Exchange (NSE) is taking place in the shadows of a legislative arm of government (the House of Representatives) holding the Securities and Exchange Commission, the regulator, hostage in the form of a refusal to appropriate funds for the running of the commission.
There has been little traction in ending the fuel subsidy bonanza, which will cost the Nigerian treasury over N1 trillion in the 2013 fiscal year, equivalent to 80 percent of the FG capital budget for the year. The power sector reform, which holds the greatest potential to transform the economy, has also been bogged down by resistance from anti-reform elements, such as unions, government officials and private individuals benefitting from the status quo.
There has also been slow progress in other reform agenda, such as improving the ease of doing business in the country, unleashing the ICRC for infrastructure improvement, reforming our ports, improving agriculture output and increasing financial inclusion for Nigerian citizens.
It is necessary to pause, reflect, and note that most of the reforms are intertwined and primarily aimed at removing the stranglehold that government has on the economy, which generally encourages corruption, while gradually changing the nature of the economy as the increased productivity and output which they bring about lead to the benefit of most Nigerians vis-à-vis beneficiaries of the status quo who kill or slow down the progress of reforms.
We urge the president and the reformers in his government – MOF, CBN, SEC, AMCON, NSE and others – to steadfastly press on with the reform agenda; anti-reformists should be bulldozed out of the way of the moving reform train.
The example from the Philippines (with a history of corruption and resistance to sensible reforms), which won an upgrade to investment grade -BBB- this month from Standard & Poor’s on the back of improving government finances and spurring growth, shows it can be done.
