Country Report Nigeria

Outlook for 2008-09

• The Economist Intelligence Unit expects the president, Umaru Yar'Adua, to consolidate his position in power. However, emerging corruption allegations against the previous administration will put him in a difficult position.
• Other major challenges for the president will be to bring greater stability to the turbulent Niger Delta region, as well as to find a solution to the ongoing energy crisis, under which nationwide power cuts are commonplace.
• Owing to a recent upsurge of violence in the Delta region, we have reduced our forecast for oil production in 2008, although it is still expected to be up on 2007 as more off-shore production is due to come on stream.
• Coupled with strong non-oil sector growth, the increase in oil production will push real GDP growth up to 7% in 2008 and 6.6% in 2009.
• Excess liquidity and rising global food prices will make it difficult for the government and the Central Bank of Nigeria to control inflation, which is forecast to average 7.6% in 2008 and 8% in 2009.
• Given the weakness of the US dollar, coupled with high oil prices, the appreciation of the naira is likely to continue into 2008, but it will weaken slightly in 2009 as the dollar recovers and oil prices moderate.
• The downward revision to our forecast for oil production will negatively affect the current-account surplus. It is now forecast at 6.1% of GDP in 2008 (previously 7.5% of GDP) and 3.5% of GDP in 2009 (previously 5% of GDP).
• The Economist Intelligence Unit expects the president, Umaru Yar'Adua, to consolidate his position in power. However, emerging corruption allegations against the previous administration will put him in a difficult position.
• Other major challenges for the president will be to bring greater stability to the turbulent Niger Delta region, as well as to find a solution to the ongoing energy crisis, under which nationwide power cuts are commonplace.
• Owing to a recent upsurge of violence in the Delta region, we have reduced our forecast for oil production in 2008, although it is still expected to be up on 2007 as more off-shore production is due to come on stream.
• Coupled with strong non-oil sector growth, the increase in oil production will push real GDP growth up to 7% in 2008 and 6.6% in 2009.
• Excess liquidity and rising global food prices will make it difficult for the government and the Central Bank of Nigeria to control inflation, which is forecast to average 7.6% in 2008 and 8% in 2009.
• Given the weakness of the US dollar, coupled with high oil prices, the appreciation of the naira is likely to continue into 2008, but it will weaken slightly in 2009 as the dollar recovers and oil prices moderate.
• The downward revision to our forecast for oil production will negatively affect the current-account surplus. It is now forecast at 6.1% of GDP in 2008 (previously 7.5% of GDP) and 3.5% of GDP in 2009 (previously 5% of GDP).

Monthly review

• The annulment of the results of the governorship polls after the contentious 2007 elections has stirred unrest in two states, including Bayelsa State in the already turbulent Delta region.
• Ongoing corruption cases have implicated the former president, Olusegun Obasanjo, and members of his family.
• Militants have renewed their attacks on oil pipelines in the Niger Delta in response to the trial of a rebel leader, Henry Okah, for treason.
• Mr Yar'Adua has approved the delayed 2008 budget. Federal government expenditure is set to increase significantly on 2007 levels, representing a threat to inflation.
• In response to the growing threats to inflation, the Central Bank has raised interest rates from 9.5% to 10%.
• The government has approved a strategy that involves investment of US$2.7bn in projects aimed at tripling electricity production in the country within 18 months.
• The annulment of the results of the governorship polls after the contentious 2007 elections has stirred unrest in two states, including Bayelsa State in the already turbulent Delta region.
• Ongoing corruption cases have implicated the former president, Olusegun Obasanjo, and members of his family.
• Militants have renewed their attacks on oil pipelines in the Niger Delta in response to the trial of a rebel leader, Henry Okah, for treason.
• Mr Yar'Adua has approved the delayed 2008 budget. Federal government expenditure is set to increase significantly on 2007 levels, representing a threat to inflation.
• In response to the growing threats to inflation, the Central Bank has raised interest rates from 9.5% to 10%.
• The government has approved a strategy that involves investment of US$2.7bn in projects aimed at tripling electricity production in the country within 18 months.