Two separate World Bank reports have rated Nigeria as having a very vibrant private sector with a strong investment profile. The first document titled "Regional Outlook" and released last month but restricted to official circles, showed that Nigeria recorded a 5.6 per cent economic growth in 2006.
The oil sector declined by 1.6 per cent due to the Niger Delta crisis, the report said.

It added that the country's non-oil Gross Domestic Product (GDP) expanded in excess of eight per cent, boosted by official spending on infrastructure.
The second report, "Financial flows to developing countries: Recent trends and prospects," said that Nigeria is ripe to begin the sale of sovereign bonds on the international market for the first time in its history.

A sovereign bond is a debt security issued by a national government within a given country and denominated in a foreign currency. It is used by most nations to finance their development projects.
Only last week, another World Bank report said that Nigeria was not improving in its record of political stability. But the latest documents attributed the resilience of the economy to the vagaries in the oil sector to a vibrant private sector and strong investment spending during the period under review.
According to second publication, Nigeria has reached the stage where it can sell sovereign bonds in the international market for the first time in its history.

The report said by 2006, almost 90 per cent of developing countries were able to access bank lending or syndicated loans, yet a few of them, excluding Nigeria, have accessed private bonds.
The buyers of sovereign bonds in the international market are normally large institutional investors, such as investment banks, pension funds, mutual funds, commercial banks, insurance companies and national governments.
As at 2006, only 40 per cent of developing countries, 56 out of the 135 analysed, the report said, had issued sovereign bonds in the past 27 years.

Reacting to the report, a Nigerian-born renowned financial advisor, Dr. Chamberlain Peterside, based in New York, said "issuing sovereign bonds in the international market can become an essential instrument through which the Federal Government can finance much of its development needs as obtained in advanced or emerging market economies."
He said countries often strenuously aspire to achieve high credit rating so that their bonds could become investment grade and more marketable in the international arena. "With an improved credit rating, Nigeria can systematically begin to explore and gain from this vital financing option that has eluded it for so long," Peterside added.

The World Bank said judging from Nigeria's improved international credit rating, it is among four sub-Saharan countries that are expected to gain access to the private bond market. The report listed the four countries that "could evolve significantly over the next few years" in the issuance of sovereign bonds for the first time as Ghana, Kenya, Nigeria and Zambia.
Although improvement in creditworthiness and favourable financing conditions have been noticed in Africa, only a few countries in the region have been able to access the international bond market.

Last year, Seychelles became the first country after South Africa from Africa to issue a sovereign bond in the international market in the past two decades.
While access to the international bond market has been a huge challenge to African countries, the report said "there has been a growing interest on the part of foreign investors in local currency bond markets notably in Botswana, Nigeria, Kenya and Zambia."
Going further, the Bretton Woods institution noted that "high commodity prices in conjunction with currency appreciation have boosted returns on local currency bonds in commodity-exporting countries such as Nigeria and Zambia."

An appendix of the report on Regional Outlooks indicated that Nigeria is sub-Saharan African second largest economy with "a vibrant private sector and strong investment spending , which kept its overall growth at 5.6 per cent in 2006, despite an estimated 1.6 per cent contraction in the oil sector caused by the unrest in the Niger Delta."
It, however, noted that despite the strength of domestic demand, "inflation declined during the course of the year as a stronger currency reduced import costs and the inflationary effects of the removal of subsidies in 2004 and 2005."
Nevertheless, signs of resurgent inflationary pressures were noted in the third and fourth quarters of last year.

A World Bank report published last week entitled "Governance Matters 2007: Worldwide governance indicators 1996-2006", had said that Nigeria's record of political instability and major violence is yet to improve even though many African countries had made remarkable progress in the area of governance and anti-corruption.
Peterside advised that once Nigeria begins to issue sovereign bonds, it should define its objectives and partner with "credible financial advisors and issuing houses."

Source: Guardian