Country Report Nigeria August 2008

Outlook for 2008-09

• Major challenges for the president, Umaru Yar'Adua, will be to bring stability to the turbulent Niger Delta region and 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, oil production in 2008 will remain below potential. Production should increase in 2009 as greater production from offshore comes on stream.
• Coupled with strong non-oil sector growth, the increase in oil production will push real GDP growth up to 6.5% in 2008 and 6.7% in 2009.
• Excess liquidity and rising global food prices will make it difficult for the government and the CBN to control inflation. The Economist Intelligence Unit has increased its forecast to an average of 9% in 2008 and 8.6% in 2009.
• High international oil prices are forecast to lead to a current-account surplus of 10.7% of GDP in 2008.
• Owing to lower oil prices and higher service charges in relation to the development of electricity and oil production, the current-account surplus is expected to fall to 5.4% of GDP in 2009.

Monthly review

• The government's planned Niger Delta Stakeholders' Summit has been cancelled amid confusion and acrimony over what was to be discussed and who should be chairing it.
• Meanwhile, violence has continued unabated in the Delta region. This has prompted the UK to offer advice and training to the Nigerian armed forces in the region.
• The elections of two more state governors have been annulled, bringing the number of results from the April 2007 gubernatorial polls cancelled to 12.
• A Nigerian nationalist group seeking to reverse the transfer of the oil-rich Bakassi peninsula from Nigeria to Cameroon has launched two attacks on Cameroonian troops in the disputed territory.
• The government has yielded to public pressure to reverse rising petroleum product prices by agreeing to consider lowering the price of diesel via costly subsidies.
• The year-on-year inflation rate climbed into double figures in June for the first time since May 2006, owing to surging global prices for food and fuel.
• The CBN has announced plans to monitor the banking sector more closely amid concerns that the industry may be putting large amounts of capital at risk as banks expand their loan portfolios aggressively.

Source: Country Report