An international rating agency has raised alarm over the state of the Nigerian economy. According to Standard & Poor’s, Nigeria’s economy is in a “clear and present danger,” with a negative sovereign ratings watch of BB minus.
Konrad Reuss regional manager, sub-Saharan Africa, said the factors putting the Nigerian economy in danger include the Boko Haram insurgency and the fall in oil prices. The expert noted that the alarm is being raised due to the importance of oil for government and export revenues, as well as the forthcoming elections.
Reuss explained that Standard & Poor’s rated Nigeria based on its six main categories and found out that Nigeria was weak in three classifications, namely: institutional and governance effectiveness, economic structure and growth, fiscal flexibility and performance.
Speaking while addressing a seminar on Nigeria in Sandton, Johannesburg, he 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 said there is 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 said 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.”
