Country Report Nigeria May 2009

Outlook for 2009-10

• The world recession and consequent slump in oil prices is expected to hit Nigeria hard, representing a major challenge for the president, Umaru Yar'Adua, and his government.
• Economic policy reform will be slow, as the country stands at a crossroads between implementing tough, unpopular market reforms and pandering to nationalistic and pro-subsidy interest groups.
• The oil sector will continue to operate below potential, owing to militant action and OPEC quota cuts, depressing economic growth.
• Real GDP growth is forecast at 2.5% in 2009, with the banking sector suffering from the global financial crisis. Real GDP growth is expected to improve to 4.4% in 2010 in line with the beginning of a global recovery.
• Food and fuel prices are expected to ease in 2009-10, but a weaker currency and looser monetary policy will mean that inflation falls only slowly, to an average of 11.4% in 2009 and 8.5% in 2010.
• Lower oil prices and production will push Nigeria's current account into a large deficit, equivalent to 10.4% of GDP in 2009, before falling to 6.3% of GDP in 2010, supported by higher prices.

Monthly review

• Nigeria's ruling People's Democratic Party (PDP) has narrowly won a re-run governorship election in Ekiti State. However, once again, violence and allegations of malpractice beset the poll.
• Mr Yar'Adua has indicated that his administration is prepared for a showdown with armed militants in the oil-producing Niger Delta.
• The government has set up a panel to probe a bribery scandal involving an American engineering firm and senior Nigerian officials.
• The president has outlined his economic vision for Nigeria, including a far-reaching plan to restructure the oil and gas sector, as well as speeding up capacity building in the power sector.
• The government is considering a US$500m economic stimulus package to try to mitigate some of the effects of the global economic downturn.
• Despite disruption to production in the Niger Delta, Nigeria is one of the nations that is significantly exceeding its OPEC quota ceiling.
• The prospect of Nigeria getting its first private petroleum refinery appears to be improving as a number plans to build a plant progress.

Source: Country Report