Despite the headwinds in the global macroeconomic outlook, we expect growth in Nigeria to remain around 7.0% over the coming years, bolstered by high government spending and improving productivity in the non-oil sectors. Security risks, which we have long highlighted, have risen, with militants increasing their activity in the northern parts of the country. The situation is beginning to have an adverse economic impact in terms of agricultural production.
Major Forecast Changes
We have again upgraded our current account forecasts, due to both a rise in non-oil exports (which have helped to offset declines in oil productivity) and a decline in imports. We estimate that the current account will equal 19.3% of GDP in 2012, before easing to 15.3% in 2013. Based on a sharp decline in oil prices which threatens government revenues as well as rising demands for expenditures we have downgraded our fiscal account balance projections. We now believe the budget deficit will equal 3.6% of GDP in 2012, compared with a previous estimate of 3.3%.
Key Risks To Outlook
The volatility in the price of oil poses a significant risk to export revenues and government receipts, a fact starkly illustrated with the sharp downturn seen in Q212. A significant deterioration in the economies of Europe, the US, or other major markets could see the price again head lower, with negative implications for Nigeria's economy. While we believe that security risks will eventually be contained, if the situation significantly deteriorates, this would potentially adversely affect investment, exports and growth.
Table of Contents
Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Boko Haram: Assessing The Risks
The continuing violence of Boko Haram – and the wider issue of increasing attacks based on ideology, political grievances and
revenge – represents a major challenge to Nigeria's future, both in terms of security risks and, increasingly, in terms of macroeconomic
fundamentals
NIGERIA POLITICAL OVERVIEW
MAJOR LATE 2011/EARLY 2012 SUSPECTED BOKO HARAM ATTACKS
Long-Term Political Outlook
'Failed State' Or African Powerhouse?
Following elections in April 2011 Nigeria is facing a number of challenges over the coming decade This poll were largely successful,
giving the country an opportunity to exorcise the embarrassing experience of 2007 when elections were riddled with what the EU
described as 'rampant vote rigging, violence, theft of ballot boxes and intimidation', and claim Nigeria's place as a regional leader and
economic powerhouse
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth To Ease, But Remain Strong
The Nigerian economy faces rising headwinds stemming from challenges at home and abroad Nevertheless, the country will
experience robust growth relative to the region and the world, thanks to increasing non-oil export s, elevated government spending and
rising household consumption
Balance Of Payments
Trade Account To Boost C/A Surplus
We continue to forecast a wide current account surplus, bolstered by historically high oil prices and rising non-oil exports, but there are
some emerging risks to our outlook A sharp retracement in crude prices in recent weeks, rising uncertainty in the global economy, and
political concerns which may constrain investment all pose downside risks to the overall balance of payments position
TABLE: CURRENT ACCOUNT
Monetary Policy
Inflation, Currency Woes To Keep Policy Tight
We retain our view that Nigerian monetary policy will be held steady through the remainder of 2012 Even as the economy is being met
by increasing headwinds, we believe that for the time being concerns about price growth and the naira will prevail, and policymakers will
prefer to maintain a relatively hawkish stance
NIGERIA – MONETARY POLICY
Fiscal Policy
Budget To Remain Under Pressure
Several demands , most notably on security in the northern states, will keep upward pressure on Nigeria 's fiscal expenditures, while
declining oil prices will take a bite out of revenues As a result, we have made a slight downgrade to our forecast for the 2012 budget
deficit , which we now believe will equal 3 6% of GDP
TABLE: FISCAL POLICY
Chapter 3: 10-Year Forecast
The Nigerian Economy To 2021
Infrastructure Investment Is Key
We are forecasting average annual real GDP growth of 7 1% over the next 10 years We expect the Nigerian government to prioritise
investment in vital infrastructure through the end of our forecast period and beyond At the same time, we project that the country will
develop the beginnings of a stronger domestic manufacturing sector by 2021
TABLE: LONG-TERM MACROECONOMIC FORECASTS
Chapter 4: Business Environment
SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions
TABLE: BMI BUSINESS AND OPERATION RISK RATINGS
TABLE: BMI LEGAL FRAMEWORK RATING
TABLE: LABOUR FORCE QUALITY
Infrastructure
TABLE: AFRICA – ANNUAL FDI INFLOWS
TABLE: TRADE AND INVESTMENT RATINGS
Market Orientation
TABLE: TOP EXPORT DESTINATIONS, US$MN, 2001-2009
Operational Risk
Chapter 5: Key Sectors
BMI Industry View
TABLE: PHARMACEUTICAL SALES INDICATORS 2008-2016
TABLE: PRESCRIPTION DRUG SALES INDICATORS 2008-2016
TABLE: PATENTED DRUG MARKET INDICATORS 2008-2016
TABLE: OTC MEDICINE SALES INDICATORS 2008-2016
TABLE: GENERIC DRUG SALES INDICATORS 2008-2016
Telecommunications
TABLE: TELECOMS SECTOR – FIXED LINE – HISTORICAL DATA & FORECASTS, 2009-2016
TABLE: TELECOMS SECTOR – INTERNET – HISTORICAL DATA & FORECASTS, 2009-2016
TABLE: TELECOMS SECTOR – MOBILE – HISTORICAL DATA & FORECASTS
TABLE: TELECOMS SECTOR – MOBILE ARPU – HISTORICAL DATA & FORECASTS (NGN)
Other Key Sectors
TABLE: AUTOS SECTOR KEY INDICATORS
TABLE: INFRASTRUCTURE SECTOR KEY INDICATORS
TABLE: FOOD AND DRINK SECTOR KEY INDICATORS
TABLE: OIL AND GAS SECTOR KEY INDICATORS
TABLE: NIGERIA FREIGHT KEY INDICATORS
Chapter 6: BMI Global Assumptions
Global Outlook
The Cycle Has Turned
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES REAL GDP GROWTH FORECAST
TABLE: REAL GDP GROWTH CONSENSUS FORECASTS
TABLE: EMERGING MARKETS REAL GDP GROWTH FORECAST 47
