Yemisi Izuora-Lagos
Fitch Ratings, a global rating agency has revised downwards Nigeria’s 2015 growth projections to 5.2 per cent from 6.4 per cent as a result of the dwindling price of crude oil in the international market. The rating agency pointed out that Nigeria and some other oil producing countries in the region would face worsening current account and fiscal balances next year.
London-based Sovereign Analysts at Fitch, Carmen Altenkirch and Richard Fox disclosed this in a statement Tuesday saying“Nigeria, along with Angola and Gabon, will also suffer from worsening current account and fiscal balances,”.
The dwindling oil prices and other commodities could return Nigeria and other emerging market nations to “junk” credit ratings, laying bare many countries’ failure to reform in good times.
The price of Brent Light crude, the benchmark for Nigeria’s Bonny Light, fell below $59 a barrel yesterday, the first time since May 2009. After dropping below $60, Brent price then fell to $58.50 a barrel, before recovering slightly to $58.94.
Oil prices have now nearly halved since June as a result of waning demand and increased supply.
The Nigerian government had responded to the development by announcing a number of cost-cutting measures also aimed at shielding the economy from exogenous shocks.
In fact, the country’s Medium Term Expenditure Framework (MTEF) was revised downward twice in the past three months from a budget benchmark of $78 per barrel to $73 per barrel and subsequently $65 per barrel.
Also disturbed by the development as well as the increasing pressure on the nation’s currency, the Central Bank of Nigeria (CBN), had last month moved the mid-point of the official window from N155/$1 to N168/$1. In addition, it had widened the band around the mid-point by 200 basis points from +/-3 per cent to +/-5 per cent.
The CBN also increased the monetary policy rate (MPR) from 12 to 13 per cent, while the cash reserve ratio (CRR) on private sector deposits was also raised from 15 to 20 per cent. The naira has depreciated by about 12 per cent this year.
However, commenting further, Altenkirch and Fox said other countries in sub-Saharan Africa would benefit from the 44 per cent plunge in oil prices this year, boosting the region’s growth to five per cent in 2015 from 4.5 per cent this year.
“Most sub-Saharan African countries are significant oil importers,” they said. “Oil makes up around 20 percent of the import bill in Kenya, Cote d’Ivoire, Seychelles and Ethiopia.”