Nigeria Business Forecast Report Q1 2009

Publication Date	October 2008
Publisher	Business Monitor
Product Type	Report
Pages	67
ISBN Number	1756-7947
Product Code	BMI02930

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Summary

Lean Times In 2009

The swift turnaround in commodity prices, coupled with the growing international financial crisis, is likely to lead to an economic slowdown and a narrowing of the current account surplus in 2009. Should oil prices continue to fall, we believe there is a risk for the current account to flip into deficit and economic growth to slow substantially more. Conversely, a rapid rebound to high levels presents upside risks to growth, the current account surplus and government revenues. On the political front, violence in the Niger Delta has recently accelerated, and there is potential for conflict to remain at elevated levels in the months ahead. We believe that a significant drop in oil prices could increase the governments incentive to implement a strategy to reduce violence, but that a rise in oil prices would bode poorly for the regions stability.

The appointment of new military chiefs who seem to favour a more aggressive stance towards the militias, preceded the most intense fighting in the Niger Delta seen in two years, and we believe further major clashes are possible. There is anecdotal evidence that militias are demonstrating increasing solidarity with each other, but we believe the prospects of a unified resistance movement emerging from the disparate militias and gangs in the region are remote. We reassert our view that the conflict shows little to no signs of abating in the medium-to-long term.

With the average price of oil forecast to drop in 2009 before increasing in 2010, we are projecting a corresponding drop and recovery in real GDP growth, primarily on the back of swings in investment. Over the longer term, we see growth stabilising above 6% as the price of oil plateaus. Declining oil exports will also negatively impact the current account in 2009, though this is likely to be partially offset by diminished oil company revenue outflows. At the same time, fiscal laxity, cessation of price controls, and unscheduled Central Bank of Nigeria interest rate cuts could stoke inflation in the early part of 2009.

Physical infrastructure should see improvement over the years ahead as the governments development strategy, which places a significant emphasis on national infrastructure investment, goes forward. Security in the Niger Delta has worsened over the year, with fighting intensifying in September 2008 and kidnappings continuing. The fight against corruption is proceeding well, with the country moving up to 121st place out of 180 countries, from 147th place, in Transparency Internationals 2008 corruptions perceptions index. Nonetheless, we are cautious that corruption will be clamped down on, as there has yet to be a high profile conviction for any wrongdoing.

Content

Executive Summary
Lean Times In 2009
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Niger Delta Violence On The Rise
- Following the appointment of new military chiefs, we see the prospect of further unusually intense fighting in the Niger Delta.
- Domestic Politics
- Oil Scenarios: Is Oil A Curse?
- In line with our special report, 'Oil At US$50? Global Implications, we examine the political implications of different oil price scenarios on Nigerian politics.
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Growth Down In 2009
- We have revised down our real GDP growth forecasts for Nigeria on the back of changes to BMIs global assumptions, and now see real GDP growth in 2009 reaching only 6.2%, down from 6.7% in 2008, before rebounding to 7.3% in 2010.
- Monetary Policy
- Central Bank Rate Cuts: Key Implications
- The Central Bank of Nigeria, following an emergency meeting of the monetary policy committee on September 18, decided to cut the policy interest rate by 50bps to 9.75%.
- Balance of Payments
- Current Account Follows Price Of Oil
- With oil accounting for more than 98% of Nigerias exports, movements in the price of oil will largely determine the value of exports (estimated at US$88.2bn in 2008).
- Here we evaluate the economic ramifications of different oil price forecasts over a ten-year horizon. While the size of the countrys current account is sensitive to the price of oil, the government budget and real GDP growth is relatively insulated.
- Special Report: Oil Price Scenario
- Oil Price Scenario: Survive Or Thrive
- With oil accounting for more than 98% of Nigerias exports, movements in the price of oil will largely determine the value of exports (estimated at US$88.2bn in 2008).
Chapter 3: 10-Year Forecast
- The Nigerian Economy To 2018
- Oil To Continue To Fund L-T Investments
- We are forecasting average annual real GDP growth of 6.6% over the next 10 years.
Chapter 4: Special Report
- Why The US Can Remain World Superpower
- Wealth Is Shifting East...
- The USs current financial woes will not necessarily undermine its position as a global superpower.
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Infrastructure
- Market Orientation
- Operational Risk
Chapter 6: Key Sectors
- Autos
- Pharmaceuticals
Chapter 7: BMI Global Assumptions
- Global
- United States
- Eurozone
- Japan
- China
- Commodities
Tables
- Table: Nigeria Political Overview
- Table: Nigeria - Economic Activity
- Table: Monetary Policy
- Table: Balance Of Payments
- Table: Nigeria Long-Term Macroeconomic Forecasts
- Table: Geopolitical Power Index
- Table: Bmi Business And Operational Risk Ratings
- Table: Bmi Legal Framework Ratings
- Table: Middle East & Africa Annual Fdi Inflows
- Table: Top Export Destinations
- Table: Nigeria Automobile Sector - Historic Data And Forecasts
- Table: Other Health Indicators
- Table: Global Assumptions