2013-02-24 15:05:09 - New Country Reports market report from Business Monitor International: "Nigeria Business Forecast Report Q2 2013"

Core Views

Governance is improving along several fronts, with serious reformers in President Goodluck Jonathan's administration leading to improved management of oil funds and the prioritisation of capital spending. However, entrenched interests will keep progress slow and security concerns may derail some reforms.

Growth will be below trend in 2013 due to the ongoing effects of the floods, global macroeconomic headwinds, disruptive violence in some northern states, and an uptick in oil theft which may hamper crude production.

Major Forecast Changes

We have downwardly adjusted our real GDP forecasts for 2013 due to our reassessment of the risks described above, and we now expect the economy to expand by 6.8%, compared with our previous projection of 7.1%.


Full Report Details at
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Incorporating new

data provided by the Central Bank of Nigeria and based on our expectation for an uptick in imports, we have also downgraded our estimates for the current account surplus in 2013, from 7.5% of GDP to 7.2%.

Key Risks To Outlook

The volatility in the price of oil poses a significant risk to export revenues and government receipts. A significant deterioration in the economies of Europe, the US, or other major markets could see the price again head lower, with negative implications for Nigeria's economy.

While we believe that security risks will eventually be contained, if the situation significantly deteriorates, this would potentially adversely affect investment, exports and growth.

Partial Table of Contents:

Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Ratings
Domestic Politics
Political Risk Still At The Fore
- Nigerian political risks, including corruption and security, will continue to weigh heavily on the sentiment of investors and other stakeholders for the foreseeable future. While there has been some measurable progress, particularly in terms of improved governance, violence and unrest, largely in the northern states, continues to plague the country.
Long-Term Political Outlook
'Failed State' Or African Powerhouse?
- Following elections in April 2011 Nigeria is facing a number of challenges over the coming decade. This poll were largely successful, giving the country an opportunity to exorcise the embarrassing experience of 2007 when elections were riddled with what the EU described as 'rampant vote rigging, violence, theft of ballot boxes and intimidation', and claim Nigeria's place as a regional leader and economic powerhouse. The country will need to press ahead with ambitious economic and business environment reforms and develop a plan to address the root causes of violence in the Niger Delta and the Middle Belt.
TABLE: POLITICAL OVERVIEW
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Ratings
Economic Activity
Growth Headwinds To Persist Into 2013
- Nigerian growth will continue to be constrained by the headwinds which characterised much of 2012, including security concerns and the lingering effects of widespread flooding, into 2013. Nevertheless, the economy will still grow rapidly by global standards, at a forecast 6.8% in 2013, compared to our 2012 estimate of 6.6%.
TABLE: ECONOMIC ACTIVITY
Fiscal Policy
2013 Budget: A Step In The Right Direction, In Theory - Nigeria's 2013 budget, which was first presented in October and passed by congress in late December, places great emphasis on increasing capital expenditure's contribution to total spending and reducing the fiscal deficit. While we believe that both objectives are a step in the right direction, the most recent data suggest that Nigeria's struggles are mainly issues of implementation, not planning.
TABLE: FISCAL POLICY
TABLE: CURRENT ACCOUNT
Balance of Payments
A Slight Downgrade, But Current Account Surplus Still Wide
- Based on new balance of payments data made available by the Central Bank of Nigeria, we have downwardly adjusted our estimate for the current account balance in 2012, as well as our forecast for 2013. We expect that some of the challenges which faced Nigeria's export sector will linger into the new year, constraining the country's overall balance of payments position, however overall the current account surplus will remain wide, forecast at 7. 2% in 2013.
Monetary Policy
Cutting Cycle To Commence Shortly
- In line with our expectations, the Central Bank of Nigeria elected to hold its benchmark interest rate at 12.00% at its most recent monetary policy committee meeting in November. However, we expect that given easing core inflation and lacklustre economic growth, policymakers will begin a loosening cycle in H113.
TABLE: MONETARY POLICY
Chapter 3: 10-Year Forecast
The Nigerian Economy To 2022
Infrastructure Investment Is Key
- We are forecasting average annual real GDP growth of 7.1% over the next 10 years. We expect the Nigerian government to prioritise investment in vital infrastructure through the end of our forecast period and beyond. At the same time, we project that the country will develop the beginnings of a stronger domestic manufacturing sector by 2021.
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, US$MN
Operational Risk
Chapter 5: Key Sectors
Food & Drink

Full Table of Contents is available at:
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