By Omoh Gabriel
There is an economic dreamer out there. His name is Goldman Sachs. In 2004, he dreamt that Nigeria will emerge one of the 20 largest economies of the world in 2025. Another dreamer, Olusegun Obasanjo, then President of Nigeria, though, he did not dream this time around, said 2025 was too long, he said his own dream was 20:2020. So Nigerians were forced to accept the dream in the name of Vision 20:2020.
Eight years to the dreamed promised land, another dreamer, this time, Fitch Rating agency, said that Nigeria can make it to the dream land in the next eight years not minding the poverty, lack of infrastructure, political bickering and insecurity in the land.
In a recent presentation on Nigeria’s Debt Capital Markets, Richard Fox, Fitch Rating’s Head of Africa/Middle East sovereigns, had compared Nigeria’s current sovereign debt metrics to those of Emerging Markets (EMs) that have recently made the transition to investment grade (IG) and came to the conclusion that Nigeria is on the path of success. Are you taken aback? Just wait and hear him.
He said: “Since 2004, seven EMs have moved up the rating scale from Nigeria’s current ‘BB-’ level to the lowest investment grade ‘BBB-’ rating. The most recent was Indonesia in 2011; the others are Azerbaijan (2010), Brazil (2008) and Bulgaria, Kazakhstan, Romania and Russia (2004). Of the seven, four are oil producers to varying degrees.
The three notch upward movement has typically taken between six and eight years, which makes it a plausible ambition for Nigeria in the context of its Vision 2020.
“Among the key indicators that Fitch uses to assess sovereign creditworthiness, three stand out as being well outside the range of experience of recent newly IG EMs: per capita GDP, reserve cover and governance (the latter measured by the World Bank’s governance indicators). These areas represent Nigeria’s biggest challenge to improving its rating, as highlighted in Fitch’s previous research.
Of the three, reserve cover is the most susceptible to rapid improvement, particularly at current high oil prices. But although Nigeria’s reserves have risen by around $2 billion this year, they are not rising as fast as in the majority of big oil exporters. “Other external data such as the current account and net external assets are comparable to those of newly IG sovereigns.
The exception is commodity dependence, reflecting the dominance of oil revenues. Although some newly IG oil exporters have had even higher oil dependence, this has been compensated by a stronger international reserves cushion against oil shocks.
“Part of the explanation for the improved trend of reserves this year is the authorities’ actions to reduce FX demand for refined petroleum imports, including the partial reduction in petroleum subsidy earlier this year. The reduction in the benchmark oil price in the 2012 budget, albeit partially, reversed by the National Assembly, was also a step in the right direction.
Nevertheless, although the Federal Government’s budget deficit and consolidated government budget surplus are within the range experienced by newly IG countries, they are not as strong as some of the major oil producers when they made the transition to IG – notably Azerbaijan and Russia. Increased fiscal savings in Nigeria’s new sovereign wealth fund will be a key driver of Nigeria’s rating.
“Nigeria’s stable and robust GDP growth of more than 7 per cent since 2009 compares well with the record of newly IG sovereigns and is even more creditable given its reliance on the non-oil sector.
However, structural reforms planned in the electricity, oil and agriculture sectors, will be crucial if growth is to be diversified and sustained closer to double digits, in order to close the large gap in per capita income. Even with a likely substantial increase in nominal GDP this year due to the rebasing of the national accounts, Nigeria’s per capita GDP will still be outside the range enjoyed by the newly IG countries when they became IG.
“Nigeria’s inflation rate is also still on the high side – in low double digits- compared to an average of 7.5 per cent for newly IG sovereigns and a range of five per cent to 12 per cent. By contrast, Nigeria scores much better on the government debt ratio which, despite creeping up, at a little under 20 per cent of GDP, is lower than the 26 per cent average for newly IG sovereigns.
Nigeria’s ability to finance itself domestically, in its relatively well developed domestic capital market, is also a major strength compared to many newly IG sovereigns.”
The unfortunate thing is that these dreamers are not Nigerians. They do not live here and do not understand how Nigerians feel. Their consolatory sermons are for the Nigerian dreamers like themselves who have stolen the nation blind.
A country of 167 million people living without even five hours of uninterrupted power supply; where 120 million live below N200 a day; where the national and sub-national governments budget 80 per cent of resources on conspicuous consumption, where leaders are not ready to make any sacrifice for the sake of the nation, where every thing under the sun is imported, where the stench of corruption in public places is to high heavens, where you cannot sleep with your two eyes closed; will become one of the 20 largest economies in 20:2020?
May be what happened to Joseph the dreamer in the Bible should apply to these people; invite them and kidnap them, so that their home governments will supply the resources and technology to take Nigeria to their dream land. Please tell that to the marine and dreamers like you.