BY MARK ITSIBOR, Abuja And KAYODE TOKEDE, Lagos –
A global credit ratings firm, Moody’s has projected Nigeria’s general government budget deficit of 3.2 per cent of the Gross Domestic Product (GDP) in 2018. The research company said the figure comprises “a 2% of GDP federal government budget deficit and around 1% of GDP deficit at the state and municipality levels, as well as arrears that are likely to be split between the three levels of government.”
Moody’s Investors Service said in an annual report that was released yesterday that Nigeria will have a general government budget deficit of 3.6 per cent of GDP in 2017, down from 4.7 per cent in 2016.
It said Nigeria’s (B2 stable) credit profile is constrained by the continued exposure of the sovereign balance sheet to shocks, weak institutions and elevated deficits.
It however stated that the country’s credit strengths include the large size of its economy and robust medium-term growth prospects supported, in particular, by its domestic demand. The research is an update to the markets and does not constitute a rating action, it said.
“Only a durable increase in non-oil revenue will improve Nigeria’s resilience to oil price volatility and increase the realisation rates of capital spending on the large infrastructure projects that are crucial for Nigeria’s economic development,” said Moody’s Vice President — Senior Credit Officer and co-author of the report, Aurélien Mali.
Mali said “Until it does, the government’s balance sheet will remain exposed to further shocks. Deficits will remain elevated and debt affordability will remain challenged. This exposure will persist, despite recent improvements in the economy, which are primarily cyclical and related to the strengthening of the oil sector.”
It also projected that Nigeria’s economic fundamentals will strengthen its recovery, with real growth of 3.3 per cent in 2018 and 4.5 per cent in 2019.