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Fitch claims until 2028 before Nigeria exits damage caused by Buharinomics

It has been revealed that Nigeria’s economy will struggle to return to the robust levels of economic growth witnessed prior to the 2014 collapse in global oil prices. A recent report released by FitchSolutions on Nigeria’s country Risk for the third quarter of 2019 has revealed.

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Nigeria's recession period, Buhari Ministerial list, Buhari ask for more time, Nigeria's economy - growth, Buhari food forex, CBN Policies

A recent report released by Fitch Solutions on Nigeria’s country Risk for the third quarter of 2019 reveals Nigeria’s economy will struggle to return to the robust levels of economic growth, witnessed prior to the 2014 collapse in global oil prices, due to the economic policies of the Buhari led Government.

According to the report, the contraction and slow projection in Nigeria’s growth will be driven by Nigeria’s challenging operating environment and back economic policies.

Over the next 10 years, Nigeria’s economy will struggle to return to the robust levels of real GDP growth recorded prior to the collapse in oil prices. With substantial increases in oil production unlikely, the country will have to develop alternative sectors, but this will likely prove difficult in Nigeria’s challenging operating environment and weak reforms.”

The report details some factors that will be responsible for the likely contracted and slow growth outlook for Nigeria’s economic outlook in the next 10 years. Here are some of the factors highlighted.

Business Unfriendly: The report revealed that there is a low expectation of oil production returning to the level witnessed between 2010-2014 for the next 10 years, and this will pose significant challenges to Nigeria’s economic outlook.

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  • However, it stated that the unfriendly business environment in Nigeria and the instability of the commodity-dependent economy will keep fixed investment below the levels required to move the country away from its oil dependence.
  • According to Fitch report, the victory of incumbent Muhammudu Buhari in the February 2019 elections suggests little scope for structural reform in the years ahead, weighing on the economy’s long-term growth prospects.
  • Hence, Nigeria’s economic growth forecast is put at 3.4% per year over the long-term outlook from 2019 to 2028, compared with 6.1% in the 2010-2014 oil boom years.

The report also shows that a combination of low prices and long-term constraints on production suggests that the oil sector will not be the economic driver that it was previously.

  • Crude exports have historically accounted for 90.0-95.0% of total merchandise exports and around 70.0% of government revenues.
  • While this has led to substantial economic growth in previous years, the outlook over the next decade is far less positive.
  • However, it was stated that Nigeria’s economy will struggle to diversify away from its long-standing oil dependence, due to a poor operating environment hindering investment into alternative sectors.

“Given the country’s growing population, the most pressing sectors for the Nigerian economy to diversify into would be those that create significant opportunities for employment, such as agriculture and manufacturing.”

“However, developing these sectors requires substantial surrounding infrastructure, including a reliable power supply and adequate storage and transport links to move to produce to market. Nigeria will find it difficult to attract the level of investment it needs to develop this infrastructure while its operating environment remains such a headwind to businesses.”

Population Upsurge – Often viewed as a highlight of the Nigerian economy, the report ironically viewed Nigeria’s booming population as a time-bomb that will trigger unrest. According to Fitch,

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  • While Nigeria’s large population should boost growth significantly, in the absence of sufficient employment opportunities there is a substantial risk that the country’s demographic dividend will turn into a demographic time bomb, with potential for the booming population to threaten political stability.
  • Meanwhile, it was noted that Nigeria’s large and fast-growing population (expected to reach 251.6 million by 2028) will ensure opportunities are on offer for investors willing to take on substantial risk
  • This will see economic activity slowly accelerate from the recession recorded in 2016.

On Corruption: According to Transparency International, Nigeria ranks 144th out of 180 countries in its 2018 Corruption Perceptions Index. According to Fitch,

  • With rampant corruption having concentrated wealth in the hands of political elites, the country suffers from significantly unequal wealth distribution and this makes policy implementation difficult.
  • Hence, high-level corruption could further a sense of grievance and raises the potential for destabilising protests.

“Nigeria’s business environment is significantly weakened by rampant corruption, burdensome bureaucratic procedures, and a weak legal framework. Financial crimes such as fraud, embezzlement and money-laundering also continue to threaten businesses operating in Nigeria.”

The latest inflation report shows that Nigeria’s inflation rose to 11.40% in May. According to Fitch, while Nigeria’s inflation moderated to an average of 12.2% in 2018, price pressures remain elevated – in part due to continued disruptions of the food supply chains because of instability in key producing areas.

Hence, it was revealed that average inflation will remain above the central bank’s target high of 9.0% until 2022. Thereafter, the inflation rate is expected to fall into high single-digit levels with slow growth in the economy.

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Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

2 Comments

2 Comments

  1. Brian

    June 21, 2019 at 7:34 pm

    Despite all these headwinds, I still believe this nation’s greatness will soon manifest.

  2. Anodebenze

    July 1, 2019 at 4:55 pm

    Now what is nairametric opinion ? there is nothing new in this American’s rating agency called fitch I do not knows when the federal govt did licensed them to operates in Nigeria.THERE IS NOTHING NEW IN THIS REPORT,RECYCLING PREJUDICES,the country have just come out recession,my view is that the govt is not moving fast and faster,as obasanjo have said,we can do more than we are doing now.
    The governor of cbn have said we will have a double growth by the next election,do you believes govt officials who have the powers to acts,or some foreign rating agency.
    There have been reform,in having business friendliness,reform in forex untilization and social lending.if various lending done by the cbn and the fed govt,the economy can grows at least 8% next year,using stats and swot using stats,i meansif govt finds any or some sector of the micro or macro economy,govt can give more power,to reinforces this sector,by swot,it means s means strength,w means weakness,o means opportunies,t means threat.
    It is lamentable that Mr Buhari veoted the NNPC,if passed, it will to competitionfuel subsidy can be removed all these joint-venture will be a thing of the past.in SWOT,we have the cbn intervening directly.they said we will lend in creative industry even brutus,sorry I means nairametric did said the cbn will lend to NYSC graduate,which can be found in this swot strategic aim.
    Instead of nairametric following a positive new angle.they started writing something,that is burning my stomach.

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Economy & Politics

Uganda Elections: Museveni re-elected for 6th term with 58.6% of the votes

Uganda’s President Museveni has won a 6th term in office as the opposition alleges wide-scale rigging.

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The President of Uganda, Yoweri Museveni, has been re-elected as President, gathering 5.85 million votes compared to 3.48 million votes by main opposition leader, Robert Kyagulanyi, a.k.a Bobi Wine.

According to Reuters, this victory represents 58.6% of the vote cast while Bobi Wine got 34.8%

Bobi Wine announced that the election results show this is the most fraudulent election in the history of Uganda and urged his followers to reject the result.

What you should know

  • Yoweri Museveni, aged 76, has been President of the East African nation since 1986.
  • Bobi Wine claimed via his official Twitter handle that military men jumped over his fence and took control of his home yesterday.

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Coronavirus

Combined Vaccine Manufacturing capacity to hit 6.8 billion doses in 2021

COVID-19 vaccine manufacturing capacity is expected to hit 6.8 billion doses in 2021.

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Covid-19: First world nations oppose waiving intellectual rights for vaccine development

Meristem Group disclosed that the combined effort in manufacturing COVID-19 vaccines for global use is expected to yield about 6.8 billion doses in 2021.

This was revealed in the Annual Outlook 2021 report presented by Meristem Group, titled Bracing for a different future.”

According to the report, the existing manufacturing capacity will only be sufficient enough to immunize about 44% of the global population, which would create obvious vaccination gap and make the pandemic last longer than necessary.

The report states,

  • The cold temperature requirements for vaccine storage pose major logistics concern particularly in Sub-Saharan Africa and other low-income countries. WHO estimates that about 50% of vaccines are wasted every year, largely due to a lack of temperature control.”

According to the report, the estimated 6.8billion doses are expected to be collaboratively manufactured as follows:  CanSino – 0.2billion, AstraZeneca – 3.0 billion, Gamaleya – 0.3billion, Moderna – 0.4billion, Pfizer-BioNtech – 1.3billion, SinoPharm – 1billion, and SinoVac – 0.6billion.

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What you should know

  • The global population as of 2020 is 7.8billion and 70% is required to achieve herd immunity (otherwise called herd protection)
  • Herd Immunity or herd protection is achieved when you have most of the population immunized against an infectious disease.
  • 2 doses of the vaccines are required for each person for immunity.
  • It is expected that between 11 and 15 billion doses would be required to achieve the desired herd immunity, globally.
  • From all indications, herd immunity may not be achieved until mid or late 2022, with the subsisting 100% vaccine production capacity utilization in 2021 – with neither production nor distribution losses.
  • To achieve regulatory approval, a vaccine must undergo a three-stage clinical development process after the exploratory and pre-clinical stages and the U.S Food and Drug Administration (FDA) sets a phase 3 efficacy benchmark of 50%.

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Coronavirus

Covid-19: Global deaths surpass 2 million

Global casualty record for the Covid-19 pandemic surpassed 2 million deaths on Friday.

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Nigeria blows past 40,000 COVID-19 cases

The Global casualty record for the Covid-19 pandemic surpassed 2 million deaths on Friday, with the United States accounting for 1 in every 5 deaths, as it has recorded over 386,000 casualties so far.

This was disclosed in a report by Reuters in its Covid-19 tally reported on Friday evening.

After the United States, Brazil, Mexico, India and the U.K contribute nearly 50% of the combined casualties.

The report also disclosed that an average of 11,900 casualties are recorded per day in year 2021, despite the fact that it took 9 months for the world to record 1 million casualties.

United Nations Secretary-General, Antonio Guterres, said the 2 million death count was “a heart-wrenching milestone.”

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  • “Behind this staggering number are names and faces: the smile now only a memory, the seat forever empty at the dinner table, the room that echoes with the silence of a loved one,” he added.

The WHO warned that 2021 could be tougher due to the nature of new variants which transmit the disease faster.

  • “We are going into a second year of this. It could even be tougher given the transmission dynamics and some of the issues that we are seeing,” WHO Chief, Mike Ryan, said.

Analysts expect the global death toll to surpass 3 million by April 2021.

What you should know 

  • Nairametrics reported that the total number of covid-19 cases in Nigeria had surpassed the 100,000 mark on Sunday 10th January 2021, according to the Nigeria Centre for Disease Control.
  • The African Union stated that it secured 270 million Covid-19 vaccine doses for the continent from drug manufacturers to supplement the COVAX programme, a step towards the commencement of the complex task of vaccinating over 1.2 billion people with limited financial resources.
  • The Nigeria Centre for Disease Control on Friday 15th January 2021, announced that 1,867 new cases of the covid-19 virus were recorded across 24 states in the country. This represents the highest number of cases recorded in a single day.

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