International rating agency, Standard & Poor’s, yesterday, sounded the alarm about the state of the Nigerian economy which it described as being in a “clear danger”. This led it to place Nigeria on a negative sovereign ratings watch, BB minus.
The rating agency in a presentation delivered by its sub-Saharan Africa Regional Manager, Konrad Reuss, listed factors putting the Nigerian economy in danger to include the Boko Haram insurgency, the fall in oil prices, because of the importance of oil for government and export revenues, as well as the forthcoming elections.
According to Reuss, 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.
The Regional Manager, who spoke while addressing a seminar on Nigeria in Sandton, north of Johannesburg, explained that 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.
Reuss argued that the reason why economic structure and growth was identified as a weakness was because of 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.
With the uncertainty surrounding the forthcoming general elections, Reuss, while admitting that elections did not automatically deliver bad results, asserted that they could deliver good ones.
His words: “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,” he stated.
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