By Joni Akpederi
Nigeria’s economy has been tipped to rank as a “Frontier market” in Standard &
Poor’s Dow Jones Indices if what the ratings agency considers right market reforms is
sustained in the coming months. Financial market index providers classify an
economy as a frontier market based on perceived levels of financial
market development, macroeconomic advancement, and reform
progress. The name was coined by the World Bank for poor developing
countries expected to be the next generation of emerging markets,
which are themselves, fast-growing economies preparing to rank among
global top- ranking developed economies.
The news has got Government functionaries and supporters as well as financial
markets institutions excited over claim that Nigeria’s economy has finally started to
look up after the long slump it plunged into at the beginning of the current
administration’ s tenure three years ago, especially after the double whammy of fuel-
subsidy removal and “floating” of the naira.
Temi Popoola, CEO of the NGX Group said the announcement reinforces
growing international confidence in the direction of Nigeria’s capital market
reforms. His counterpart at the Securities and Exchange Commission, Dr
Emomotimi Agama, believes the Commission’s reform agenda focused on
building a forward-looking market structure capable of supporting “intelligent
investing through faster settlement systems, tokenised securities and deeper
derivatives markets” is a contributory factor.
However, the excitement is not shared by many economy watchers and analyst of Nigeria’s
troubled economy. While it is true that the classification will improve Nigeria’s image on the
international investing community, it will also increase the country’s access to international
credit. The worry is that the country is already in danger of piling up huge debt approaching
unsustainability of 40% of GDP
This is not the first time Nigeria would be hailed as a potential globally significant economy
with great potential. Way back in 2005, the iconic global lender, Goldman Sachs, identified
Nigeria as a high-potential frontier market, famously categorizing it as one of the “Next Eleven”
(N-11) countries with significant growth potential similar to the BRIC nations. The institution
even stuck out its neck to speculate that Nigeria could be the Fifth largest economy in the world
by 2075, based on the potential Nigeria’s economic data and potential then evinced.
Two decades after that optimistic projection, Nigeria’s political economy has wobbled badly and
is still hamstrung by terrible challenges that put its long term survival in incontestable peril.
Top on the list of the Challenges is the lingering, intractable insecurity that has all but cut off
large swathes as ungovernable lands in the vast Northern Nigeria, now beyond the control of
the central Government in Abuja.
The country is currently buffeted by the blatant, hydra-headed monster of insurgency featuring,
preening a motley Islamist-Jihadists. The insecurity demon has grown into murderous
kidnapping rings, with copycat gangs emerging from all nooks and crannies of the country’s
huge, uncharted land mass.
The consequences of the destabilization have been borne by the economy. The insurgency has
caused a massive drop not only in productivity in the agricultural and transportation sectors,
leading to high inflationary pressures creeping up to 20%. The situation is worsened by massive
jobs losses in the North where hundreds of thousands of farmers driven of their lands now
populate refugees camps.
Today, Nigeria is still in the lowly “standalone” rank, where it has been wallowing since it
dropped off its perch on the frontier status, where it had been in the first decade of the new
millennium.
While the news of possible fresh upgrading to the frontier market status is welcome, many
Nigerians do not see any radical improvements in governance, especially, in the run up to
another round of elections in 2027.
Already, the rough and tumble in the current pre-election period, analysts say, is causing the
ruling authorities to gloss over serious issues in the economy with sham populist policies for
political expediency.