A major boost was given to Nigeria’s quest for foreign investment inflow at the weekend as the country was named the least vulnerable economy in the world, according to a report, Global Economics, compiled by a team of experts from Merrill Lynch.
Merrill Lynch is one of the world’s leading financial management and advisory companies, providing financial advice and investment banking services.
The report, a copy of which was made available to THISDAY at the weekend, was compiled following several data requests from clients of the investment bank for key risk indicators for all major economies including Europe, the Middle East and Africa (EMEA).
According to the statistics, the world’s 10 least vulnerable economies are Nigeria, Mexico, Phili-ppines, Colombia, Egypt, Oman, Indonesia, Peru, China and Russia.
Also, the report identified Australia, Switzerland, Korea, Romania, Hungary, Sweden, Bulgaria, Euro area, United Kingdom and the United States of America as the highest risk economies in the world.
The risk ranking was based on seven indicators and they are - current account financing gap, foreign exchange reser-ves/short-term external debt ratio, private credit-to-Gross Domestic Product (GDP) ratio, and private credit growth, loans to deposits and banks capital-to-assets ratio. Merrill Lynch said the report also addressed all the requests in 62 indicators of the 60 world economies.
According to the report, Nigeria, with a population of 141.41million, was able to record a 7.3 per cent growth in GDP, with its Consumer Price Index hovering at 11.5 per cent, its current account balance, fiscal balance and public debt at 6 per cent, 6.3 and 10.4 percentage respectively.
To determine its external vulnerability, Nigeria’s external debt position was put at 12.9 per cent of the GDP, while external debt /exports ratio was put at 9 per cent. Her forex reserves totalled $60.8billion.
The percentage of Nigeria’s total external debt in relation to the GDP was put at two per cent, total foreign claims is $15.3billion while international claims stood at $13.1billion.
The report stated that the percentage of Current Account Balance plus net Foreign Direct Investment of the Nigerian GDP was 34, Forex reserves/short-term external debt totalled 41, while percentage of export of the GDP was 38 point.
The percentage of private credit of GDP was 43, while the percentage of bank capital to assets, according to Merrill Lynch was 41.
The 10 most vulnerable countries, which are mostly European countries, were said to have exhibited worse balance of payments positions, stretched external debt service ratios and overleveraged financial systems.
“Many of the economies that top our risk ranking have been identified by the National Bureau of Economic Research (NBER) as those that have experienced capital flow bonanzas in the past five years and hence exhibit higher likelihood of economic crisis,” the report explained.
Explaining further on how it put the report together, Merrill Lynch states that: “While we believe that our country risk ranking produces plausible results, one needs to be aware that, as any ranking of that type, it is highly sensitive to the selection of indicators employed. For example, developed countries can probably sustain higher external vulnerability indicators than emerging markets; some Euro area country statistics are possibly misleading given there is a monetary union.”
In their reactions, the leadership of the Nigerian organised private sector said the various investment-friendly programmes put in place especially in the past five years largely gave Nigeria a pride of place in the ranking.
Immediate past Director-General of the Nigerian Economic Summit Group (NESG), Dr. Mansur Ahmed said the latest ranking has confirmed that Nigeria is indeed an investors-haven. The feat, he said, should be traced to a regime of consistent and sustained improvement in the nation’s fiscal management.
Speaking with THISDAY in a telephone interview yesterday, Ahmed acknowledged that Nigeria has been able to maintain a healthy foreign exchange management, low budget deficit and heavily low external indebtedness, which he said have combined to grossly reduce the nation’s level of risk. He said those indices have also endeared the nation’s economy to foreign investors.
However, the incumbent DG of NESG, Mazi Sam Ohuanbuwa said the investment community would not be surprised at the latest ranking by Merrill Lynch.
According to him, the key indicator to the safety of investment in Nigeria is the freedom to invest in any part of the country without government’s intervention.
He maintained that issues like hostile acquisitions, or government take-over is not common in Nigeria, explaining that even in cases where government reversed policies, it is always limited to government investments.
“In Nigeria, people can invest anywhere without hindrance. Other important considerations are the sheer size of the Nigerian market and underlying macro-economic issues,” Ohuanbuwa said.
He noted that although investors in Nigeria are still complaining of high cost of doing business, the level of risk is far lower than what obtains some other economies of the world.
On measures to improve on the latest ranking, the experts were unanimous in their call for the sustenance of investor-friendly policies by the government.
Ahmed emphasised the need for effective management of the nation’s foreign asset especially in the face of the dwindling prices of crude oil at the international market.
Ohuanbuwa charged the government to liberalise the economy by removing all hindrances to the economy.