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Fitch reviews Nigeria’s 2015 economic growth to 5.2%

By on December 19, 2014

Global rating agency, Fitch Ratings, has reviewed downward Nigeria’s 2015 economic growth forecast from 6.4 per cent to 5.2 per cent, following the continued fall in the global oil prices.

“Growth in Nigeria, sub-Saharan Africa’s largest economy, has been revised down from 6.4 per cent to 5.2 per cent for 2015, as a result of lower oil prices and tighter policy” Fitch said on Tuesday in a statement by its Senior Directors, Richard Fox and Carmen Altenkirch.

It added that “lower oil prices will dampen growth in Angola, Nigeria and Gabon, which will also see external and fiscal balances worsen.”

The international research agency, in its latest sub-Saharan Africa Credit Overview, said the ability of Nigeria and other countries in the SSA region to grow next year would be impacted by their “degree of commodity dependence, exposure to China, domestic challenges and capacity to invest.”

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Fitch also noted that challenges in the electricity sector might also affect economic growth in some African countries in 2015.

It, however, said that the level of economic growth in the SSA region would differ from country to country, pointing out that the falling oil prices would be a blessing to some oil-importing African nations.

“Most SSA countries are significant oil importers – oil makes up around 20 per cent of the import bill in Kenya, Cote d’ Ivoire, Seychelles and Ethiopia – and will therefore be beneficiaries of lower prices,” it stated.

As a result, the research firm said it expected an average Gross Domestic Product growth of five per cent in 2015 for the 18 countries rated by the agency, up from 4.5 per cent in 2014.

According to Fitch, inflation is expected to moderate across the region due to lower oil and agricultural prices, adding that public finances will remain expansionary, with the average budget deficit rising to 4.9 per cent of the GDP in 2015, up from 3.9 per cent in 2014 and 0.8 per cent in 2011.

It further noted that “over the same period, the average current account will swing from surplus into deficit.”

The statement said, “SSA ratings will be driven more by success or failure in promoting macro stability and structural reform than commodity price changes. The Seychelles and Rwanda are good examples of sovereigns that have improved their policy frameworks and governance, leading each to be upgraded two notches since their ratings were assigned. We placed Zambia and Cote d’Ivoire on Positive Outlook in 2014 and if the policy environment continues improving both could eventually be upgraded.

“Home-grown challenges will hamper growth and could weigh on ratings over the coming year in Ghana and South Africa. Growth in South Africa will be held back by challenging labour relations, electricity shortages and weak private sector investment. Fiscal consolidation – a rating sensitivity – will be dependent on keeping public sector wage growth broadly in line with inflation. In Ghana, deteriorating confidence, a shortage of electricity and lower commodity prices will dent growth and the country’s ability to raise revenue in the year ahead, undermining the credibility of the government’s deficit reduction strategy.

“Countries benefiting from ambitious infrastructure spending programmes (Kenya, Uganda, Mozambique, Cote d’Ivoire and Ethiopia) will continue to grow robustly. However, balancing the need for increased infrastructure investment against the need to maintain debt sustainability highlights the increasing challenge that countries like Kenya, Lesotho and Mozambique may face with government debt levels already above the ‘B’ median of 43 per cent of the GDP.

 

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