Nigeria Business Forecast Report Q4 2009

Publication Date	July 2009
Publisher	Business Monitor
Product Type	Report
Pages	61
ISBN Number	not applicable
Product Code	BMI04098

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Summary

Significant Slowdown Ahead The Nigerian authorities made two bold moves in Q209: the first, an offer of total amnesty to militants in the Niger Delta, is unlikely to solve the problem of violence in the region, in our view. The second, a set of banking sector reforms and monetary policy innovations from the new governor of the Central Bank of Nigeria (CBN), Lamido Sanusi, however, could well address the root of many problems in the Nigerian banking sector. Looking ahead, we see the potential for a minor shortterm fall in militant activity, as at least some groups negotiate with the government, but no systemic change. In the banking world, we believe the following year could see upheaval, as banks struggle to adjust to tighter disclosure rules and audits by the central bank, and this could be reflected in the equity market, though the reforms will be positive in the long run.

Looking first to the Niger Delta, President Yar'Adua's offer of amnesty followed the most intense military strike against the militants in a decade. To us this looks like an attempt to push the militants into accepting peace by making it difficult for them to continue armed struggle. The plan does little though to address the underlying motivations of the militants, most importantly the presence of readily stolen oil amid corruption and poverty. For this reason, we believe the offer is unlikely to end significant militant activity in the region. That said, we also believe there to be no clear and easy solution to the problem, and the amnesty could play a role in a wider policy that significantly curbs violence in the region.

We are more optimistic about changes to the banking system, which we believe get to the heart of the sector's problems - namely weak regulation and disclosure rules. Going forward, if the policies are successful in easing liquidity in the banking sector, it could pose an upside risk to our revised real GDP growth forecast of 1.9% in 2009 and 2.7% in 2010. Meanwhile, following the decision to abandon exchange rate controls, announced in conjunction with the other policies, we forecast further weakness of the naira against the dollar, though risks to this view are mounting with the rise of oil prices. We have revised up our oil price forecasts since our last quarterly report, leading to an improvement in our forecasts for the current account deficit.

Finally, regarding the business environment, poor physical infrastructure remains a significant shortcoming, with port congestion a major problem. At the same time, a string of attacks by militants in the Niger Delta, despite the offer of amnesty, continues to impede oil production, although there is still foreign investor interest in the sector. Corruption remains a major issue despite the country's improved rating in Transparency International's Corruption Perceptions Index.

Content

Executive Summary
Significant Slowdown Ahead
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- Low Expectations On Niger Delta Amnesty
- While President Umaru Yar'Adua's offer of an amnesty for militants, following a major military strike, represents
- a bold move by the so-far cautious government, we do not believe it will significantly impact the violent climate in
- the region
- Table : Political Over view
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economic Activity
- Growth To 1.9% In 2009
- Revisions to Nigeria's first quarter growth figures support our initial, more bearish outlook on Nigerian growth
- TABLE: ECONOMIC ACTIVITY
- Exchange Rate Policy
- Aggressive Monetary Policies: Key Implications
- If implemented successfully, the new policies announced by the Central Bank of Nigeria at its July meeting, the
- first under its new central bank governor, should go a long way towards bringing down interbank interest rates,
- increasing confidence in the banking system and restoring the relevance of the monetary policy rate
- TABLE: MONETARY POLICY
- Balance Of Payments
- Oil Sinks Current Account
- Oil affects Nigeria's balance of trade in a number of ways, but overall a drop in the price of oil is a net negative
- for the current account, as export revenues fall
- TABLE: CURRENT ACCOUNT
- Investment Climate
- Equities: Choppy Waters Ahead
- While improved regulation and disclosure regarding the Nigerian banking sector pose upside risks to Nigerian
- equities, especially in the longer term, we believe the index will trade in a wide range for the coming year
Chapter 3: 10-Year Forecast
- The Nigerian Economy To 2018
- Infrastructure Investment Is Key
- We are forecasting average annual real GDP growth of 5.8% over the next 10 years
- Table : Long -Term Macroeconomic Forecasts
Chapter 4: Special Report
- The Fate Of ???Chindia'
- Overview
- Although China and India will continue to grow during the global recession of 2009-2010, they are not immune to
- the downturn, and face a number of risks in the near term
- China And India SWOT
Chapter 5: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
- Institutions
- TABLE: BMI LEGAL FRAMEWORK RATINGS
- Infrastructure
- Market Orientation
- TABLE: MIDDLE EAST & AFRICA ANNUAL FDI INFLOWS
- TABLE: TOP EXPORT DESTINATIONS
- Operational Risk
Chapter 6: Key Sectors
- Pharmaceuticals
- Table : Generic Drug Market Indicators , Historical Data and Forecasts , 2003-2013
- Industry Forecast
- Table : OTC Market Data Indicators , Historical Data & Forecasts
- Table : Nigeria 's Prescription Drug Market Indicators , Historical Data & Forecasts
- Shipping
- Market Overview
- TABLE 1: MAJOR PORT DATA
Chapter 7: BMI Global Assumptions
- Global Assumptions
- TABLE: GLOBAL ASSUMPTIONS
- TABLE: GLOBAL & REGIONAL REAL GDP GROWTH
- TABLE: DEVELOPED MARKET EXCHANGE RATES
- TABLE: EMERGING MARKET EXCHANGE RATES