Nigeria Business Forecast Report Q3 2008

Publication Date	May 2008
Publisher	Business Monitor
Product Type	Report
Pages	64
ISBN Number	1756-7947
Product Code	BMI01252

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Summary

Yar'adua One Year in President Yar'Adua's first year in office has been characterised by his cautious, process-oriented approach to governance. This style augurs well for Nigeria's political institutions, at least in the long run, and has given the Economic and Financial Crimes Commission space to operate. It has, however, also tended to slow the passage of government policy, especially with regards to the 2008 budget and the long-delayed power sector reforms. On the economic front, rising oil prices have continued to spur export growth and bolster the government's fiscal expenditure. We are forecasting a rise in inflation through the year, due to higher domestic liquidity, but believe the Central Bank of nigeria will act aggressively to keep inflation below 10%, at least on average.

Meanwhile the government's privatisation programme has hit some bumps following the reversal of several deals, but we believe this is not indicative of a broader policy change.

We believe power generation will continue to be a drag on economic growth, despite the president's planned investments in the sector. The president and the National Assembly have been conducting investigations into the power industry's failure to meet demand, and have uncovered widespread institutional weakness, especially with regards to oversight and planning, which is likely to further complicate efforts to improve supply. We are similarly cautious that violence in the Niger delta and corruption could slow short- to medium-term improvement. With regards to the 2008 budget, Yar'Adua's insistence that he be presented with a complete breakdown of expenditure before he would endorse it establishes a good precedent that should foster budget transparency in the long run.

The year 2008 should be a very strong year for Nigeria's economy. We forecast high levels of growth and a record current account surplus, largely buoyed by our projected high price of oil.

High oil prices should also increase foreign reserves, boding well for our sovereign risk ratings for Nigeria, but also threaten to accelerate inflation. We see oil prices slipping past 2008, narrowing the country's current account surplus as large income and service deficits exert major drags, although the country's real GDP growth should be sustained, partially from robust non-oil growth and by increasing private consumption.

We do not believe several recently reversed privatisation deals indicate the government intends to move away from privatisation and liberalisation of the economy, as we feel most of the reversals revolved around a flawed bidding process rather than a desire to seize corporate profits. Physical infrastructure should see improvement over the years ahead as the government's development strategy, which places a significant emphasis on national infrastructure investment, goes forward.

Security in the country has worsened over the year, and we are pessimistic about short- or mediumterm improvements. The fight against corruption is proceeding well, with the forced resignation of the EFCC's chairmen doing little to slow down the pace of prosecutions. Nonetheless, we are cautious that corruption will see major improvements, as there has yet to be a high-profile conviction.

Content

Executive Summary5
Yar'adua One Year in
Chapter 1: Political Outlook6
- SWOT analysis
- BMi Political risk ratings
- Domestic Politics8
- Yar'adua One Year in
- After a year in office, President Umaru Yar'Adua's cautious style has led to few major policy initiatives, but
- could secure a less volatile and personality driven political environment in the long run, if it is maintained
- Table: Nigeria Political Overview
Chapter 2: economic Outlook
- economic activity
- emerging Middle Class?
- While we project government expenditure and private capital investment to be the primary drivers of economic
- growth through 2012, we are also forecasting a growing, though still small, role for private consumption
- Table: economic activity
- Monetary Policy
- rate Hike: Key implications
- The Central Bank of Nigeria (CBN) has raised the monetary policy rate to 10.0% from 9.5%, the rate held since
- December 4 2007
- Table: Monetary Policy
- Balance of Payments
- Table: Balance Of Payments
- external Debt
- Corporate Debt Not a Major risk
- Corporate external debt is not substantial in Nigeria, and even if the country was forced to orchestrate a bail
- out of commercial banks, it would not be likely to significantly affect Nigeria's ability to meet its own external
- debt obligations
Chapter 3: Special report
- Business Outlook For global Frontier Markets
- growing Fast On The New Frontier
- The 41 states that BMI examines in a new report on our online service may make up only a small slice of the
- world economy, but they possess characteristics that will see them gain importance in the eyes of investors and
- global businesses over the coming years
- Table: Frontier Markets - Key Data and Projections For Top 10 Countries
- Frontier investment
- Potential and Pitfuls
- The spectacular macroeconomic performance of frontier markets in recent years has been matched by mildly
- successful efforts to deepen capital markets
- Table: gDP Per Capita, US$ (in Order Of % increase)
- Table: Diversify Through Frontier Markets - Correlation Coefficients January 2004-April 2008
- Table: Frontier Market indices
- regional Overview
- Laos
- Neighbouring economies The Key To growth
- Laos's GDP growth has been boosted in recent years as neighbours China, Thailand and Vietnam compete for its
- natural resources
- Yemen
- Huge Potential, But Don't Bank On gCC Membership
- Markets do not come much more frontier than Yemen, and, as would be expected, there is huge potential for
- development, with the prospect of eventual GCC membership likely to act a key investment pull
- Table: Yemen - economic activity32
- Democratic republic Of The Congo
- Mining industry To Drive growth
- The Democratic Republic of the Congo's mining industry will be a key driver of growth and is likely to attract
- significant levels of FDI, with our real GDP forecasts standing at 8.3% and 7.9% in 2008 and 2009, respectively
- Table: Democratic republic Of The Congo - economic activity34
- Cuba
- investment Prospects after Fidel
- The accession of a new leadership structure in Cuba has sparked excitement that the 45-year-old trade embargo
- with the US may be lifted and Cuba may move toward market liberalisation
- Table: Cuba Macroeconomic Data and Forecasts38
- Mongolia
- Minerals To Drive economic Boom
- Mongolia is in the midst of a massive resource-led economic boom that should lift GDP growth into the double digits
- and underpin robust increases in exports and inflows of foreign investment capital over the long term
- Table: Mongolia - economic activity
Chapter 4: Business environment41
- SWOT analysis41
- BMi Business environment risk ratings42
- Business environment Outlook
- Table: BMi Business and Operational risk ratings
- institutions
- Table: BMi Legal Framework ratings
- infrastructure
- Market Orientation
- Table: Middle East & Africa FDI Inflows
- Table: Top import Sources (US$mn)
- Table: Top export Destinations (US$mn)
- Operational risk
Chapter 5: Key Sectors54
- Pharmaceuticals
- Table: Nigeria's Health Expenditure, 2007-2012 (US$mn unless otherwise stated)55
- Food & Drink
- Table: Nigeria grocery retail Sales Value By Format (US$bn) - Historical Data & Forecasts
- Table: Food Consumption - Historical Data & Forecasts