Despite the threats presented by the Islamist insurgency in the north, conflicts between Fulani herdsmen and farmers in the Middle Belt region, and also, the rising unrest in the South which poses a threat to Nigeria’s existence, the country will pull through its challenges over the next decade even though they would weigh down its economic growth by deterring investment and impeding private consumption, the Fitch Solutions Group, an affiliate of global ratings agency, Fitch, has stated.
The was contained in a report by the UK-based organization, titled, “Nigeria Country Risk Report – Q1- 2022,” which also included a 10-year forecast to 2030, obtained yesterday.
“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 projects that Nigeria’s Gross Domestic Product (GDP) would rise by a modest 2.1 per cent in 2021, after shrinking by an estimated 1.9 per cent; and accelerate to 2.8 per cent in 2022 on the back of stronger household consumption, and rise in fixed investment and oil exports.
Also, Fitch, in the report, revealed that it had revised its projection for Nigeria’s 2021 budget deficit to 4.8 per cent of GDP, from 4.2 per cent, after the publication of official data showing weaker federal government earnings than it had previously expected. 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.
Also, the research firm forecasted that in 2022, strengthening economic growth would offer the Central Bank of Nigeria (CBN) opportunity to move its focus to curbing inflation and increasing the Monetary Policy Rate (MPR) by 100 basis points to 12.50 per cent.
It indicated doubt over the Nigerian government’s ability to carry out major economic reforms before the 2023 general election, stating that campaigns ahead of political parties’ election primaries would take centre stage between now and 2022.
The federal government had expressed its intentions to stop payment on petrol subsidy, which had been labelled a major source of drainage and wastage on the economy, by April, 2022. 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.”
