Oscarline Onwuemenyi 10 February 2016, Sweetcude, Abuja – The Fitch Rating Agency has alleged that President Muhammadu Buhari’s recent economic policy pronouncements that tended to coalesce around state-led development to blunt the effects of declining oil receipts may not generate the stimulus the country needs to sustain growth.
Mrs. Kemi Adeosun, Minister of Finance
In a statement released in London, the agency said it was not convinced government’s current policy measures can promote growth while containing fiscal pressures facing the country at the moment.
It, however, expressed concern over a number of downside risks the country faces in the aftermath of reduction in crude oil earnings.
It said, “The emerging economic policies under President Muhammadu Buhari include an increase in public spending, state-directed investment, revenue-side reforms, and accommodative monetary policy.”
The report noted that December’s mildly expansionary 2016 budget envisages spending of N6 trillion ($30bn), up from N4.6 trillion in the 2015 budget, including a 30per cent increase in capital spending.
It explained that, “The government aims to finance additional spending through revenue-side reforms, including improved tax collection and public finance management, and by increasing external financing.
“The fall in oil prices below the $38/b level assumed in the 2016 budget has increased the need for external financing, and the government recently announced it is looking to the World Bank and African Development Bank for additional lending and is exploring a Eurobond issuance sometime in 1H16.”
Fitch, however, noted that, “We think the drag on growth from the Nigerian private sector’s inability to access sufficient hard currency will outweigh the benefits of planned fiscal stimulus, and that the CBN will struggle to defend the naira indefinitely.”