New Nigeria administration may miss electoral commitments

New York (Capital Markets in Africa) — The New Nigerian administration could miss most of its electoral commitments. Credit Suisse indicated that President Muhammadu Buhari and the new All Progressives Congress (APC)-led government face some immediate challenges that include a widening fiscal deficit, substantial debt maturities, oil-sector problems, and instability in the north of the country. It considered that the new administration is unlikely to deliver many of its major campaign promises in the near term as it deals with last year’s macroeconomic shocks. Credit Suisse assigned a low probability that the new administration would achieve its commitments of economic growth, job creation, socioeconomic development, and to improve public finances, economic infrastructure and food security. First, it projected Nigeria’s real GDP growth to decelerate from 6.2% in 2014 to 4.9% in 2015, which means that the government would miss its 10% average annual growth target. It considered that the APC would target economic stabilization rather than acceleration over the near term. Second, it pointed out that authorities are unlikely to create at least one million jobs in 2015, given that the private sector’s ability to hire would remain constrained in the context of weaker economic environment, and as the 2015 budget aims to freeze the public-sector wage bill. Third, it considered that the APC would put on hold its socioeconomic targets as it deals with the major budgetary challenges it faces over the near term. It noted that the new administration will inherit a significant amount of outstanding payments in federal salaries, oil subsidies and debt-servicing costs, adding that the federal savings had been largely depleted. Fourth, it projected the fiscal deficit to widen from 0.7% of GDP in 2014 to 1.3% of GDP in 2015. It estimated that authorities would continue to issue debt to finance the deficit, but it considered that the use of debt to finance recurrent expenditures and debt-servicing costs is unsustainable. Fifth, it pointed out that the new administration would be unable to resolve the power crisis in the short term, given the extent of the crisis and the lack of domestic funding for investment in the near term. On a final note, Credit Suisse assigned a high probability for the new administration to meet its security, corruption and governance promises, and an even probability to meet its democratization target.