[size=15pt]Standard & Poor�s Downgrades Nigeria�s Credit Rating[/size]
By Ayodele Aminu with agency report, 03.28.2009

Standard & Poor�s (S&P) yesterday lowered Nigeria's ratings outlook to "negative" from "stable", citing falling oil revenues, which were hurting public finances.
S&P, the world�s formost provider of independent credit ratings had warned earlier this week that ratings across Africa were being �skewed to the downside" by the global economic crisis.
It said it was watching Nigeria's rating �very closely�, and was nervous over falling reserves and "unorthodox policy measures" that risked undermining foreign investor confidence.
The ratings agency, which also affirmed Nigeria's "BB-" foreign currency and "BB" local currency long-term sovereign credit ratings, in its latest report on Nigeria said "considerable uncertainty" surrounded the outlook for the country's finances because of higher government spending and production constraints arising from quota limits imposed by energy cartel Organisation of Petroleum Exporting Countries (OPEC).
"The negative outlook reflects the increased risk that the institutional response to falling oil revenue will result in a continued worsening of the business environment and a deterioration of Nigeria's balance sheet beyond our central assumptions," said S&P in a statement.
With Nigeria �overwhelmingly reliant� on oil, its 2009 budget projections �may be difficult to attain given long-standing constraints on output stemming from unrest in the Niger Delta,� the statement said.
Attacks by armed groups in the southern region that accounts for almost all of Nigeria�s oil and gas have cut more than 20 per cent of crude exports since 2006. Oil accounts for more than 80 per cent of government revenue and 95 per cent of foreign exchange earnings.
The reduction indicates S&P may lower its rating on Nigeria�s debt and is a reflection of the worsening business environment created by falling oil revenue and the �institutional response� to it. S&P forecast a current account deficit of 7.2 per cent of gross domestic product this year, compared with estimates of a 6.3 per cent surplus last year.
It said the downgrading of Nigeria's rating outlook also reflected the government's response to the global financial crisis and its reliance on oil exports. Oil collapsed from almost $150 last year to close to $50 now.
"We believe the adverse terms of trade shock will hurt Nigeria's credit profile both on the fiscal and external side," S&P added.
S&P said the foreign exchange controls imposed by Nigeria last February would continue to hurt Nigerian banks' access to cross-border funding and weaken portfolio investor confidence.
Nigeria has effectively frozen the inter-bank foreign exchange market to stem the decline in the naira currency as it slumped along with the oil price, spooking foreign investors but it said the move should act as a "shock absorber".
�The deteriorating outlook prompted the Central Bank of Nigeria to impose currency controls in order to preserve foreign exchange reserves, reported at year-end 2008 at 35 per cent of forecast 2009 gross external financing needs. These currency controls have caused a re-emergence of the parallel foreign exchange market, following it�s conversion with the official rate.
�Notwithstanding assurances that funds are available for the legitimate current transactions of corporations, these controls will hurt the banks' access to cross-border funding and will weaken portfolio investor confidence. We also expect the quality of banks' credit and security portfolios to weaken given the turbulence in local capital markets and the sudden slowdown in economic growth, and bank profitability to be lowered by recently imposed lending and deposit ceilings.
�We expect bank lending growth to fall sharply to 6% in 2009, following an estimated average of more than 80% over the past two years, which will in turn constrain overall GDP growth to 1.5% this year,� the rating agency said.
S&P warned that slower economic growth would hit the quality of Nigeria's bank credit portfolio and hurt bank profitability.
Several other countries including Botswana, Ghana and South Africa have already seen ratings or outlooks cut, while Zambia and Tanzania have abandoned moves towards getting ratings as they were seen having little prospect of issuing foreign currency bonds given tight global credit conditions.
"Expect more downgrades," said Razia Khan, regional head of research for Africa at Standard Chartered bank. "A lot of countries are going to be impacted negatively by the crisis, and there has been a reassessment of what the crisis will mean for Africa."
She said the S&P Nigeria action was not unexpected but was perhaps overly harsh, given that when Nigeria was first rated in January 2006, oil prices were only slightly higher than currently.
"The risks to external liquidity are a little overdone, but the oil price has come off its highs and people are looking at the policy response and whether it is the best way forward," she said

http://www.thisdayonline.com/nview.php?id=139351

We expect bank lending growth to fall sharply to 6% in 2009, following an estimated average of more than 80% over the past two years, which will in turn constrain overall GDP growth to 1.5% this year,� the rating agency said.

With a population growth rate of about 2%, GDP growth of 1.5% will mean that our economy will shrink relative to our population. Very tough days ahead.

[size=15pt]S&P’s negative outlook for Nigeria not unexpected –FG[/size]

By Yemi Kolapo
Published: Monday, 30 Mar 2009

The cut in Standard & Poor’s ratings outlook from “stable” to “negative” is not unexpected, considering the fiscal revenue contraction being witnessed in the economy, the Federal Government has said.
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Minister of State for Finance, Mr. Remi Babalola

The Minister of State for Finance, Mr. Remi Babalola, said on Saturday that the country’s outlook was not expected to be very optimistic since the nation relied heavily on oil revenue, which had continued to decrease as a result of falling world oil prices.

Standard & Poor’s said on Friday that it had lowered Nigeria’s ratings outlook to “negative” from “stable”, saying, falling oil revenues were straining public finances.

Reuters reported that S&P had warned earlier last week that ratings across Africa were being skewed to the downside by the global economic crisis, and that it was watching Nigeria’s rating very closely.

The ratings agency also said it was nervous over falling reserves and “unorthodox policy measures” that risked undermining foreign investor-confidence.

However, Babalola, who spoke in a telephone interview with our correspondent on Saturday, said the fact that the outlook had changed did not imply that the rating had also changed.

“That the outlook has changed does not mean that the rating has changed. What your outlook is, determines whether your rating will be downgraded in the next one year,” he said.

The minister, however, said the eventual rating could be negative or positive depending on what happened in the Nigerian economy between now and the next rating.

According to him, “The rating may or may not be negative. It depends on what happens between now and the next rating. With the type of fiscal revenue contraction that we have, and when you realise that we rely heavily on oil, we should expect that.

“That was why S&P looked at it and said with what is happening in our economy, the outlook is not very optimistic. But when you look at the direction that the price of crude is going now, from the prognosis that we have, it is more promising than in the last four months.”

He said there was a possibility that the revenue constraint might be exaggerated as the year went by, adding that “if we don’t have production hiccups, and price moves to about $52 or $55 per barrel, it means that we will be able to earn sufficient money to cushion that weather.”

But Reuters said the agency, which also affirmed Nigeria ‘s “BB-” foreign currency and “BB” local currency long-term sovereign credit ratings, said considerable uncertainty surrounded the outlook for the country’s finances because of higher government spending and production constraints arising from quota limits imposed by energy cartel, OPEC.

“The negative outlook reflects the increased risk that the institutional response to falling oil revenue would result in a continued worsening of the business environment and a deterioration of Nigeria’s balance sheet beyond our central assumptions,” S&P said.

It said the downgrading of Nigeria ‘s rating outlook also reflected the government’s response to the global financial crisis and its reliance on oil exports, adding that “we believe the adverse terms of trade shock would hurt Nigeria ’s credit profile both on the fiscal and external side.”

http://www.punchng.com/Articl.aspx?theartic=Art20090330423626

[size=15pt]Nigeria may not survive global economic meltdown — Don[/size]

By Femi Makinde, Akure
Published: Monday, 30 Mar 2009

A university lecturer said that Nigeria may not be able to weather the negative effect of the current global economic meltdown except it becomes serious with the problem of corruption.

The don, Dr. James Okunlola of the Department of Agricultural Economics, Federal University of Technology, Akure identified corruption as one factor which may likely plunge the country into a deeper crisis following the global financial crisis.

He said this in a lecture he delivered on Friday at a workshop organised by the Akure District of the Institute of Chartered Accountants of Nigeria on the way out of the global economic meltdown for Nigeria.

Okunlola said, “It is time to end insecurity in the anti-corruption crusade. Nigeria may not survive the current economic melt down if the issue of corruption is not dealt with appropriately.

“Corruption destroys the economy. The priority now is to evolve realistic measures that would reduce the scope of corruption and ensure that money derived from oil and other natural resources is invested to areas which would benefit Nigerians.”

http://www.punchng.com/Articl.aspx?theartic=Art20090330359050

Really sad that our leaders still think all this is just a joke, we still have president that still dont know it is time for them to act and make sure we find other ways to raise money and not just the Oil, price of Oil has gone down drastically and yet they are not doing anything to develop other sectors to generate revenue.
Agriculture could be a great way to generate fund/revenue for Nigeria, we have so much fertile lands, and yet nothing is being done.
imagine 1$ being bought for 175Naira, what a shame.

[size=15pt]Saving the Naira Townhall meeting:A currency on the precipice [/size]

Written by GABRIEL OMOH
Wednesday, 25 March 2009

Introduction
THE pressure on the naira at the Foreign Exchange Market has continued to mount and see further depreciation in the value of the naira over the years. A number of factors have been responsible for this development. The naira has unfortunately been the weeping currency as it has been caught on a cross-fire and interplay of both international economics and politics as well as local market forces.
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Yar Adua
The naira which in 1970 on the average exchanged for $0.7143 and 1.7114 British pound in 2009, about 30 years after exchanges on the average at N170 to the dollar and N240 to one British pound Sterling pound.

Looking down memory lane and time series of data showed that the naira had strength against major currency in the seventies when Nigeria was not even a major oil exporter. Then Nigeria was just beginning to export oil which sold at low prices.

In 1971 one naira was equivalent to $0.6955 and 1.7156 pound. In 1972 when the country was just recovering from the civil war, one dollar exchanged for N0.6579 and one pound for N1.6289. In 1973 which saw the hike and subsequent quadrupling of oil prices as a result of the Israeli-Arab war in the middle East saw one American dollar going for N0.6579 at the foreign exchange market and one British pound for N1.6289 and in 1974 during the famous Udoji award to Nigerian workers the naira was still strong enough to exchange at N0.6299 to the dollar and N1.4795 to the British pound.

It was the same story of strength for the naira in 1975 when N0.6159 could buy one dollar and N1.3618 could give the holder one pound sterling. In 1976, N0.6265 could buy one dollar while N1.1317 could give the owner a pound sterling in the foreign exchange market.

These were years when a Nigerian travelling abroad was highly regarded and welcomed to any foreign international airport. It was the period that Nigeria pursued import substitution industrial policy and almost every input to local manufacturing was imported. These were the periods regarded as the first oil boom which has become a source of economic rent that is the undoing of the nation. Nigerians then would not wear a second hand clothing nor ride on motor circle in town.

In 1977 N0.6466 was equivalent to one dollar and N1.1671 was the same as one pound. Going through time series data in 1978 N0.6060 was the exchange rate of the dollar and N1.2238 for the pound. It was the same trend in 1979 when N0.5957 exchanged for one dollar and N1.2628 to one pound. But at the time there was sign of weakness in the economy and the legendary Awolowo warned the nation that the economy was heading for the woods. The then Shagari administration openly denounced the allegation and nothing was done to diversify the economy.

It was the time of importation of rice and all manners of things. Up to 1980 the naira was still strong and at the time there was import licensing and foreign exchange rationing. At the time N0.5464 exchanged for one dollar and N1.2647 for a British pound. In 1981 the local currency was still holding on strong with N0.6100 exchanging for one dollar and N1.2495 for pound sterling. In 1981 when N0.6729 exchanged for one dollar the government of NPN had introduced austerity measure and imposed import licensing and control measures. In 1983 when the army struck and took over government, N0.7241 was exchanging for one dollar and N1.1216 for a British pound. In 1984 N0.7649 exchanged for one dollar and N1.0765 exchanged for one pound, while in 1985 N0.8938 was exchanged for one dollar and N1.1999 for a pound.

The travail of the naira as a national currency began in 1986 when the Babagida-led military administration introduced the Structural Adjustment Programme (SAP) and officially devalued the naira through the introduction of the second tier foreign exchange market. While government institutions and parastals got foreign exchange at the official rate, private sector sourced theirs through the second tier market. At the introduction of the system the naira at the official market was N2.0206 to the dollar and N2.5554 to the pound.

By 1987 the naira had depreciated to N4.0179 to the dollar and N6.5929 to the pound, in 1988 the exchange rate was N4.5367 and N8.0895 to the dollar and the pound respectively. During this period Abudukadir Ahmed, who was the Governor of the Central Bank merged the two markets into one which saw the exchange rate of the naira moving from about N12 to the dollar to N22. The exchange rate of the naira remained fairly stable at N22 to the dollar until 1999 when the Obasanjo administration was elected.

http://www.vanguardngr.com/content/view/31958/171/