Moody’s Investors Service said Nigeria’s economy remains resilient in the face of falling oil prices even as the currency slumped to a record low and growth in Africa’s largest crude producer is set to slow.
Nigeria economy, the continent’s biggest, will probably expand 5 percent next year, Aurelien Mali, Moody’s senior analytical adviser, said today in an e-mailed statement. That’s in line with forecasts from the International Monetary Fund and the government’s revised estimate of 5.35 percent.
The West African nation’s government relies on crude exports for about 70 percent of its income and 95 percent of foreign exchange earnings, leaving it vulnerable to price and quantity shocks. Finance Minister Ngozi Okonjo-Iweala is seeking to cut spending in next year’s budget by 8 percent to 4.36 trillion naira ($23.9 billion) as revenue plunges.
“Nigeria benefits from a resilient economy and robust fiscal position, although the recent drop in oil prices will likely put pressure on public finances and could lead to the widening of fiscal deficits,” Moody’s said. Spending cuts and taxes on non-oil industries may help to close the gap, it said.
Moody’s rates Nigeria’s debt at Ba3, three levels below investment grade, with a stable outlook.
Oil prices have slumped 45 percent in the past six months, eroding foreign-currency reserves and forcing the central bank to devalue the currency for the first time in three years. The naira fell 1.3 percent to 182.35 per dollar on the interbank market as of 4:10 p.m. in Lagos, the commercial capital.
Nigeria’s government debt, which is “very low” at 13.2 percent of gross domestic product, will probably increase to 14.6 percent in 2015, Moody’s said. As a proportion of government revenue, debt is set to rise to 130 percent from 121.8 percent, it said. Both ratios are low compared to market peers rated Ba3, according to Moody’s.