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Nigeria Business Forecast Report Q1 2015

  • October 2014
  • -
  • Business Monitor International
  • -
  • 51 pages

Core Views
A lthough we continue to forecast robust economic growth in 2015 and the years thereafter, the risks to the Nigerian economy have increased over recent quarters thanks to shifting dynamics in global oil markets. N igeria's balance of payments position will come under renewed pressure as February 2015 elections approach. A balance of payments crisis is unlikely however owing to a healthy level of foreign exchange reserves. Over the longer term, Nigeria's external accounts will become increasingly susceptible to negative shocks owing to a subdued outlook for oil export growth.

S eptember's hawkish monetary policy statement will calm lingering fears that new central bank governor Godwin Emefiele will prematurely loosen policy. This is important for macro stability given that food prices, rising banking sector liquidity and higher government spending ahead of the February 2015 election will increase inflationary
pressures and exert depreciatory forces on the currency. The People's Democratic Party (PDP) has recovered from some of the damage inflicted by defections in late 2013 and 2014 and is reasserting itself as Nigeria's dominant political force. The February 2015 election will be the most closely fought in the country's democratic history, but the power of incumbency, wrangling in the opposition and the fact that it remains the only truly national party means that the PDP is likely to win.

Major Forecast Changes
No major forecast changes.

Table Of Contents

Nigeria Business Forecast Report Q1 2015
Executive Summary 5
Core Views..5
Major Forecast Changes.5
Key Risks To Outlook..5
Chapter 1: Political Outlook 7
SWOT Analysis. 7
BMI Political Risk Index.. 7
Domestic politics 8
PDP Recovery Points To 2015 Election Win..8
The People's Democratic Party (PDP) has recovered from some of the damage inflicted by defections in late 2013 and 2014 and
is reasserting itself as Nigeria's dominant political force. The February 2015 election will be the most closely fought in the country's
democratic history, but the power of incumbency, wrangling in the opposition and the fact that it remains the only truly national party
means that the PDP is likely to win.
Long-Term Political Outlook 9
Inequality, Corruption And Militancy Pose Long-Term Challenges.9
Nigeria's stability continues to be undermined by competition for political and economic power betwe en various ethnic, political and
geographical groups. The best -case scenario over the next 10 years is for a slow but steady move to a stable democracy. A more likely
outcome, however, would be a continuation of the fragility that has prevailed since 1999. Although unlikely, a major collapse of the state
cannot be ruled out.
Chapter 2: Economic Outlook. 13
SWOT Analysis.. 13
BMI Economic Risk Index 13
Economic Activity .. 14
Shifting Oil Market Dynamics Pose Risks To Growth14
Although we continue to forecast robust economic growth in 2015 and the years thereafter, the risks to the Nigerian economy have
increased over recent quarters thanks to shifting dynamics in global oil markets.
table: Economic Activity ..14
Exchange Rate Policy 16
NGN: Managed Depreciation Ahead.16
The naira will remain under depreciatory pressure in the short term but the unit will not fall through support at NGN165.00/USD over
the next six months. A recent hawkish monetary policy statement by the central bank provides some comfort that the authorities will
continue to focus on currency stability over the longer term. However, this will slow rather than prevent the depreciation of the naira over
a multi-year time horizon.
table: BMI CURENCY FORECAST.16
Monetary Policy 17
Hawkish Monetary Policy Statement Augurs Macro Stability17
September's hawkish monetary policy statement will calm lingering fears that new central bank governor Godwin Emefiele will
prematurely loosen policy. This is important for macro stability given that food prices, rising banking sector liquidity and higher
government spending ahead of the February 2015 election will increase inflationary pressures and exert depreciatory forces on the
currency.
table: Monetary Policy..17
Balance Of Payments 19
External Accounts: Short And Long-Term Risks Pervade..19
Nigeria's balance of payments position will come under renewed pressure as February 2015 elections approach. A balance of payments
crisis is unlikely however owing to a healthy level of foreign exchange reserves. Over the longer term, Nigeria's external accounts will
become increasingly susceptible to negative shocks owing to a subdued outlook for oil export growth.
Table: Current Account.19
Chapter 3: 10-Year Forecast. 23
The Nigerian Economy To 2023.. 23
Power Sector Key For Long-Term Productivity.23
Despite being measured from a higher base following the recalculation of GDP in early 2014, Nigeria's economy will grow by around
7.0% per year over the next 10 years thanks to increasing productivity in the non-oil sector. Although the oil sector will not contribute
much to headline growth, it will be crucial to macro economic stability as it will remain the most important source of export and fiscal
revenues. Major risks to the economy include a deterioration in the security situation, a fall in oil prices and/or production, and slowerthan-
expected improvement in the power sector.
table: Long-Term Macroeconomic Forecasts23
Chapter 4: Operational Risk. 27
Operational Risk Index. 27
Operational Risk 28
table: Operational Risk..28
Transport Network .. 29
table: Transport Network Risks..30
Economic Openness . 34
table: Economic Openness Risk..35
table: Product Exports.36
table: Product Imports From Top Five Trade Partners, USDmn 36
Chapter 5: Key Sectors.. 39
Oil and Gas 39
table : Oil Production And Consumption Short -Term Forecast 40
table: Oil Production And Consumption Long-Term Forecast..41
Infrastructure.. 43
table: Construction And Infrastructure Industry Data46
Other Key Sectors 47
table : Pharma Sector Key Indicators .47
table: Telecoms Sector Key Indicators47
table: Food and Drink Sector Key Indicators48
table : Freight Key Indicators ..48
Chapter 6: BMI Global Assumptions.. 49
Global Outlook 49
Big Emerging Market Revisions.49
Table: Global Assumptions.49
Table : Developed States , Real GDP Gro wtH, %..50
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %.. 50
Table : Emerging Markets , Real GDP Gro wth , %.51

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