Nigeria Business Forecast Report Q4 2014

Date: July 21, 2014
Pages: 46
Price:
US$ 1,195.00
Publisher: Business Monitor International
Report type: Strategic Report
Delivery: E-mail Delivery (PDF)
ID: N0BAC16F41BEN
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Nigeria Business Forecast Report Q4 2014
Includes 3 FREE quarterly updates

Core Views

Political risk was one of the dominant discussion themes during BMI’s visit to Nigeria in June. Although there was some acknowledgement that the deteriorating security situation is part of the electoral cycle as the January 2015 elections approach, there is a sense that the emergence of Boko Haram has crystallised the usual threat associated with elections.

Nigerian economic growth will slow to 6.5% in both 2014 and 2015 (from 6.7% in 2013) as security issues, elections and uncertainty about monetary policy weigh on private consumption and investment. The impact of these issues will not be too significant or longlasting and our forecasts therefore remain relatively robust, small downgrades aside. However, we note that risks are to the downside.

Although there is some concern that monetary policy will be loosened under the new central bank governor, this is unlikely in the lead-up to the February 2015 election due to pressure on the currency. The trajectory of policy after the election is more difficult to predict but we believe that the aggressive loosening expected by some is unlikely.

Increased spending, much of which relates to upcoming elections, is as much to blame for Nigeria’s recent fiscal deterioration as lower-than-planned oil production. The deficit will remain small at only 2.2% of GDP in 2014 and a low debt-to-GDP ratio means that a fiscal crisis is not imminent. However, challenges to the oil sector over the longer term mean that risks will build if the issue of fiscal opacity is not dealt with.

The naira will remain volatile over the next six months as downside pressure will emanate from the approach of elections and shifting global financial market sentiment. However, central bank support will prevent the unit from depreciating significantly. Pressure should subside after the election but uncertainty over the trajectory of monetary policy poses risks to this view.
Executive Summary
Core Views
Key Risks To Outlook

CHAPTER 1: POLITICAL OUTLOOK

SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
On The Ground: Political Risk Concerns At The Fore
Political risk and concerns about the trajectory of monetary policy were two of the dominant discussion themes during BMI's visit to
Nigeria in June. Our contacts on the ground largely share our upbeat view on real GDP growth but highlighted the aforementioned
issues as the biggest threats to the economy.

CHAPTER 2: ECONOMIC OUTLOOK

SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Security Issues To Weigh On Northern Consumption
Nigerian economic growth will slow to 6.5% in both 2014 and 2015 as security issues, elections and uncertainty about monetary policy
weigh on private consumption and investment. The impact of these issues will not be too significant or longlasting and our forecasts
therefore remain relatively robust, small downgrades aside. However, we note that risks are to the downside.
  Table: Economic Activity
Exchange Rate Policy
NGN: Manageable Pressure With Downside Risks
The naira will remain volatile over the next six months as downside pressure will emanate from the approach of elections and shifting
global financial market sentiment. However central bank support will prevent the unit from depreciating significantly. Pressure should
subside after the election but uncertainty over the trajectory of monetary policy poses risks to this view.
  Table: Currency Forecast
Monetary Policy
Monetary Loosening Unlikely Despite Mixed Policy Signals
Although there is some concern that policy will be loosened under the new central bank governor, this is unlikely in the lead up to the
February 2015 election due to pressure on the currency. The trajectory of policy after the election is more difficult to predict but we
believe that the aggressive loosening that some are expecting is unlikely.
  Table: Monetary Policy
Fiscal Policy
Small Fiscal Deficit Belies Profligacy
Increased spending, much of which relates to upcoming elections, is as much to blame for Nigeria's recent fiscal deterioration as lowerthan-
planned oil production. The deficit will remain small at only 2.2% of GDP in 2014 and a low debt-to-GDP ratio means that a fiscal
crisis is not imminent.
  Table: Fiscal Policy

CHAPTER 3: 10-YEAR FORECAST

The Nigerian Economy To 2023
Power Sector Key For Long-Term Productivity
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 Forecasts

CHAPTER 4: BUSINESS ENVIRONMENT

SWOT Analysis
BMI Business Environment Risk Ratings
Business Environment Outlook
Institutions
  Table: BMI BUSINESS AND OPERATION RISK RATINGS
  Table: BMI LEGAL FRAMEWORK RATING
  Table: LABOUR FORCE QUALITY
Infrastructure
  Table: AFRICA - ANNUAL FDI INFLOWS
  Table: TRADE AND INVESTMENT RATINGS
Market Orientation
  Table: TOP EXPORT DESTINATIONS, USDmn
Operational Risk

CHAPTER 5: KEY SECTORS

Pharmaceuticals & Healthcare
  Table: Pharmaceutical Sales , Historical Data And Forecasts
  Table: Healthcare Expenditure Trends , Historical Data And Forecasts
  Table: Government Healthcare Expenditure Trends , Historical Data And Forecasts
  Table: Pri vate Healthcare Expenditure Trends , Historical Data And Forecasts
Telecommunications
  Table: Telecoms Sector -Mobile -Historical Data & Forecasts
  Table: Telecoms Sector -Wireline -Historical Data & Forecasts
  Table: Telecoms Sector -Internet -Historical Data & Forecast
Other Key Sectors
  Table: Oil and Gas Sector Key Indicators
  Table: Infrastructure Sector Key Indicators
  Table: Food and Drink Sector Key Indicators
  Table: Autos Sector Key Indicators
  Table: Freight Key Indicators

CHAPTER 6: BMI GLOBAL ASSUMPTIONS

Global Outlook
Global Recovery Still On Track
  Table: Global Assumptions
  Table: Developed States , Real GDP Growt H, %
  Table: BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
  Table: Emerging Markets , Real GDP Growth , %
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