Nigeria’s Economy In Danger – Report

International rating agency, Standard & Poor’s (S&P), 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 its regional manager, sub-Saharan Africa, Konrad Reuss, 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, and the forthcoming elections.Reuss explained that S&P rated Nigeria based on its six main categories and found out that Nigeria was weak in three classifications:
institutional and governance effectiveness, economic structure and growth, fiscal flexibility and performance. In addition, Reuss, who was addressing a seminar on Nigeria in Sandton, 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.He 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.”Meanwhile, the NBS, in its Foreign Trade Statistics for the Fourth Quarter of 2014, released yesterday, estimated that with an export of N12.8 trillion, crude oil accounted for 74.4 per cent of Nigeria’s total export of N17.204 trillion in 2014.Specifically, the NBS said, “On an annual basis, the total exports of Nigeria stood at N17.204 trillion at the end of 2014, representing a rise of N2.959 trillion or 20.8 per cent over the level in 2013. The structure of Nigeria’s export is still dominated by crude oil exports. The contribution of crude oil to the value of total domestic export trade amounted to N12.791 trillion or 74.4 per cent in 2014 (estimated).”The NBS stated that the highest export product for Nigeria in 2014 was mineral products, which accounted for N15,718.0 billion or 91.4 per cent.It said, “Other products that contributed immensely to Nigeria’s exports include vehicles, aircraft and parts thereof, vessels and so on, and products of the chemical and allied industries whose values stood at N357.7 billion or 2.1 per cent, and N315.6 billion or 1.8 per cent, respectively, of the total exports of Nigeria for the year.”The NBS data revealed that in the first quarter of 2014, crude oil export stood at N3.234 trillion while non-crude oil export stood at N735.865 billion. In the second quarter, crude oil export rose slightly to N3.269 trillion while non-crude oil export also rose to N1.413 trillion. In the third quarter, crude oil export dropped to N3.15 trillion, compared to non-crude oil exports which rose to N1.549 trillion.