Nigeria has been projected to have current account surplus of 2.8 percent of Gross Domestic Product (GDP) in 2018, more positive than some East African countries forecast to have the widest current account deficits as a proportion of GDP, with Rwanda and Kenya in the high single digits, according to Renaissance Capital (RenCap).
Nigeria’s current account surplus jumped nearly fourfold from $2.5 billion in 2016 to $9.5 billion in 2017, while Cumulative Capital importation as of nine month 2017 rose 91.5 percent year-on-year to a two-year high of $6.8 billion, analysts at Afrinvest Securities Limited said.
“We expect SSA’s average budget and C/A deficits to remain wide in 2018, which raises financing questions. Although we see stronger commodity prices and growth moderately narrowing the region’s budget and C/A deficits, they will still be 2ppt and 1ppt, respectively, wider than the 2000-2017 average of c. 2.5% of GDP, by our estimates,” Yvonne Mhango, SSA economist, RenCap, said in a note to BusinessDay.
The investment bank economists expect the financing of current account deficits in 2018 to come from foreign direct investment (FDI), particularly in Mozambique and Zambia, where there are sizeable commodity projects, and official loans (that is Eurobonds in Kenya, Ghana and Nigeria).
Most of the SSA countries covered by RenCap have budget deficits that are significantly wider than the (IMF-) recommended threshold of 3 percent of GDP.
Although it expects a pick-up in capex in Nigeria ahead of the 2019 elections, an improvement in revenue will temper the increase in the full year 2018 deficit to 2.8 percent of GDP, by our estimate. “We expect Zambia and Kenya’s budget deficits to be particularly wide, at c. 7 percent of GDP in 2018.”
Nigeria’s states, particularly those in the South, which fall within 70-80 percent literacy rate, now have the human capital to industrialise, RenCap said.
It pointed out that industrialisation was more likely in states with a literacy rate of 70 percent or more, and most likely in states with a literacy rate of 80 percent or more.
“It may be no coincidence then that the Ministry of Industry, Trade and Investment has chosen Abia (one of the highest literacy rates in the country) and nearby Akwa Ibom (literacy rate of 70-80%) as the first two model zones for its special industrial parks. Other brownfield zones include highly literate Lagos (over 80%), as well as Cross River and Kano (literacy rates of 70-80%),” Rencap said.
“Now Nigeria ‘just’ needs some improvement on electricity and infrastructure,” Charlie Robertson, global chief economist, said in a note to BusinessDay.
Nigeria’s literacy rate of 60 percent is too low for industrialisation and lags behind both Bangladesh and Pakistan in terms of developing industry, even though all three have similar literacy rates, the report noted.
Responding to this, Taiwo Oyedele, head of tax and regulatory services, PWC, said, Nigeria’s literacy rate at 60 percent is too low for everything, not just industrialisation.
“We need to close the 40% illiteracy gap but a more fundamental issue is the quality of education, mindset and mental fitness of the literate populace. For instance, how does one explain a situation where graduates believe they can do rituals to make money rather than hardwork? Such people though literate are bad for industrialisation and development,” Oyedele said.