Notwithstanding threats posed by the Islamist insurgency in the north, clashes between Fulani herdsmen and pastoralists in the Middle Belt region as well as growing unrest in the South which have continued to threaten the country’s existence, Nigeria will survive its challenges over the next decade, the Fitch Solutions Group, an affiliate of global ratings agency, Fitch, has stated.
The UK-based organisation stated this in a report titled,
“Nigeria Country Risk Report – Q1- 2022,” which also included a 10-year
forecast to 2030.
“Rising population levels, high unemployment and competition
for diminishing resources in a period of slower economic growth will exacerbate
ethnic and religious grievances in Nigeria over the next decade, and the
country will continue to face security challenges on three major fronts.
“Our core view is that the Nigerian state will survive these
interlocking challenges, although they will weigh on growth by deterring
investment and impeding private consumption.
There is a downside risk, however, that ethno-religious
divides will eventually lead to the break-up of the state. The next several
years will be a major test for Nigeria, as the slow recovery following the
Covid-19 pandemic deepens poverty and further erodes the government’s ability
to provide public goods. A weakened state may struggle to unite the diverse
country, which has Africa’s largest population.
“Nigeria already faces three clear security threats: the
Islamist insurgency in the north, clashes between Fulani herdsmen and
pastoralists in the Middle Belt region, and growing unrest in the south. Even
so, our core view remains that the federal republic will still exist at the end
of the decade. Democracy will become increasingly entrenched, and social
unrest, while likely to increase, will remain contained to the sub-regional
level,” it predicted.
The report predicted that Nigeria’s Gross Domestic Product
(GDP) would grow by a modest 2.1 per cent in 2021, after contracting by an
estimated 1.9 per cent; and accelerate to 2.8 per cent in 2022 on the back of
stronger household spending, and increases in fixed investment and oil exports.
In addition, Fitch, in the report, disclosed that it had
revised its forecast for Nigeria’s 2021 budget deficit to 4.8 per cent of GDP,
from 4.2 per cent, following the publication of official data indicating weaker
federal government revenue than it had previously anticipated. It anticipated
that the country’s current account deficit would narrow slightly to 1.9 per
cent of GDP in 2022, largely as a result of a further narrowing of the trade
deficit.
Furthermore, the research firm predicted that in 2022, strengthening
economic growth would provide the Central Bank of Nigeria (CBN) room to shift
its focus to containing inflation and hiking the Monetary Policy Rate (MPR) by
100 basis points to 12.50 per cent.
It expressed doubt over the ability of the Nigerian
government to implement major economic reforms ahead of the 2023 general
election, saying campaigns ahead of political parties’ election primaries would
be the focus of attention between now and 2022.
The federal government had disclosed a plan to remove
subsidy on petrol, which had been described as a major drain and waste on the
economy, by May next year. The Petroleum Industry Act (PIA) recommended the
removal of the controversial fuel subsidy, even as the World Bank and some
other institutions had warned about the dire consequence of retaining the
policy.
But Fitch, in the report, pointed out that, “Campaigning
ahead of party primaries will shift political attention away from reforms in
fourth quarter of 2021 and 2022.”
It noted that although the President Muhammadu Buhari
administration had made notable progress in 2021, particularly as regards
simplifying the exchange rate regime and passing landmark oil sector reforms,
further significant progress was unlikely this quarter and in 2022.
This is because politicians from the two major political
parties – the ruling All Progressives Congress (APC) and the main opposition
Peoples Democratic Party (PDP) – would focus on campaigning and mobilising
support ahead of their primary elections, likely to be held in the second half
of 2022, the report said.
The Fitch report stated, “In this context, progress on
politically unpopular reforms, such the reduction of fuel and electricity
subsidies, is unlikely in the coming quarters, and the resulting continued pressure
on public finances will contribute to Nigeria posting large fiscal deficits in
2021 and 2022 (we forecast deficits of 4.8% and 4.5% of GDP respectively).
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