Nigerian Economy Ranked Far Above its African Peers

Nigeria has been ranked far ahead of its peers on the continent based on the strength of the country’s macroeconomic indicators.
A Lagos-based research and financial advisory firm, Renaissance Capital (RenCap), revealed this in its latest report on sub-Saharan Africa (SSA) titled, ‘Who’s Hot and Who’s Not’.
Other countries assessed in the report were Ghana, Kenya, Rwanda, Tanzania, Zimbabwe and Zambia.

Nigeria, in April this year, rebased its gross domestic product (GDP), which saw estimates hitting $509.9 billion. Following the rebasing exercise, nigeria emerged Africa’s biggest economy and the 26th largest in the world.

Also, in spite of the huge infrastructure gap and security challenges in the country, THISDAY recently reported that activities in the Nigerian manufacturing sector had continued to grow, attracting huge foreign direct investment (FDI) inflows by global multinational brands.

The RenCap report highlighted the country’s improving external position (9 to 10 months of import cover) and a small fiscal deficit (1 to 2 per cent of GDP), as major factors driving its macroeconomic growth.

Moreover, it pointed out that a recovery in the oil sector had led to stronger growth in nigeria.
Accordingly, RenCap revised its growth forecast for the country to 6.3 per cent and 6.5 per cent in 2014 and 2015 respectively, as against its prior forecast of 5.7 per cent and 5.6 per cent.

It explained: “Nigeria’s macro (economic fundamentals) stand well ahead of its peers. Yes, elections are almost upon us (February 2015), but we do not think that should detract Nigeria’s otherwise solid macro credentials – especially given our view that the electoral process and outcome will be relatively stable.
“Post-elections, we expect interest rate cuts as soon as the second half of 2015, which we think will allow year-on-year credit growth to pick up from current high single-digits to the mid-teens.

“This is positive for equities and the banks should also give a lift to the consumer, as the effect of any pre-election wage hikes dissipates.”

It also rated Nigerian banks above their peers in Kenya based on valuation.
“Admittedly, the operating environment in nigeria is tougher versus other key SSA markets and this has led to a lower sector-wide return-on-equity (RoE).
“The good news is we see a recovery from the second half of 2015, when we expect Nigeria’s monetary policy to ease, which is banks-positive,” it declared.


Nigeria’s economic growth improved to 6.5 per cent year-on-year in the second quarter of 2014, as against the 5.4 per cent year-on-year attained a year earlier, on the back of a recovery in the oil and gas sector.

After six consecutive quarters of year-on-year contraction, the oil sector grew by 5.1 per cent in the second quarter of 2014, compared to 1.4 per cent in the second quarter of 2013.

This reflected the moderate improvement in oil production to between 2.20 and 2.25 million barrels per day in the first half of 2014, from 2.20 million barrels per day in 2013.

The improvement in oil production was mainly attributed to better patrolling and monitoring of oil facilities in the first half of 2014.

“We expect these measures to support a continued improvement in oil production. Nigeria’s potential oil output is 2.5 million barrels per day.
“The risk to our outlook is resumption in the decline of oil output and a lower price. We are projecting output of 2.2 to 2.3 million barrel per day and price of $100 to $105 per barrel in 2015,” it added.

The ramping up of oil output in the US had placed downward pressure on the international oil price and a strengthening dollar, owing to prospects of higher US interest rates, implies downside risk to commodity prices.

RenCap also noted that Nigeria’s recovering forex reserves at $39.57 billion brings an anticipated cut in interest rate closer.

It argued that the measures the Central Bank of Nigeria (CBN) had taken to “plug the holes” in forex reserves, including the revision of the Bureau de Change (BDC) regulations, would help conserve reserves.

“We no longer expect naira devaluation only some depreciation as the February 2015 elections approach.

“We think a firmer currency will help dissipate inflationary pressures and improve the likelihood of rate cuts,” it stated.
Nevertheless, in Kenya where fiscal policy is expansionary, RenCap anticipated higher public investment as a percentage of GDP, particularly in energy and transport infrastructure.

In Ghana, where discussions between the authorities and the International Monetary Fund (IMF) on turning around the economy started in early September, the report stated that it expects the ensuing restrictive policy reforms to be negative for banks and consumer companies; and to slow fixed investment, which is negative for cement stocks