Our comprehensive assessment of Nigeria's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Nigeria, as well as the latest industry developments that could impact Nigeria's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Nigeria before your competitors.

Country Risk

Nigeria Country Risk

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Core Views

  • Presidential elections on February 14 will be the most closely fought since Nigeria's return to democracy in 1999. While a victory for incumbent President Goodluck Jonathan and his ruling People's Democratic Party (PDP) is the most likely outcome, victory is not assured. Regardless of outcome, we expect little major deviation in policy trajectory given the personality-based nature of Nigerian politics.

  • Currency concerns will be the central issue for the Central Bank of Nigeria in 2015. Following aggressive tightening of monetary policy in November, we believe that further tightening measures will be necessary to anchor inflation expectations and reassure jittery markets.

  • The economic outlook for Nigeria has deteriorated. While we maintain our broad view that falling oil prices will not have a major impact on headline GDP growth...

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Nigeria Operational Risk Coverage (9)

Nigeria Operational Risk

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BMI View: Nigeria offers investors one of the most difficult and dangerous operating environments in Sub-Saharan Africa (SSA). The major risks to businesses stem from the deteriorating domestic security situation, which is characterised by rampant criminal activity and frequent terrorist attacks. These risks pose dangers to the safety of foreign workers and business interests, and also cause disruption to the country's utilities infrastructure and transport network, both of which are struggling to meet the needs of an expanding economy and population. Corruption is also endemic across both the public and private sector, complicating government bureaucracy and deterring foreign direct investment (FDI). The government faces huge challenges in addressing these issues in order to maintain strong FDI...

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Nigeria Crime & Security

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BMI View: Nigeria's operating environment is characterised by a multitude of risks, the chief of which are domestic terrorism, endemic corruption, and criminality. Foreign workers are highly vulnerable in Nigeria, with risks posed by a wide range of crimes from petty theft to serious fraud and violent crime, as well as terrorist attacks. Nigeria's highly unstable domestic security situation is somewhat mitigated by its secure international position, which means that the country ranks 27th out of 44 Sub-Saharan African (SSA) states in the BMI Crime And Security Risk Index, with a score of 34.0 out of 100. However, we note that the only countries in SSA...

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Nigeria Labour Market

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BMI View: Overall, Nigeria has a large pool of skilled and unskilled labour relative to other countries in Sub-Saharan Africa (SSA) owing to its population size, demographics and the sheer number people completing various levels of education. However, poor infrastructure and frequent strike action affects the quality of products from the country's educational institutions, especially at the tertiary level, leading businesses to retrain graduate employees or recruit foreign trained graduates at an extra cost. Nigeria has a total Labour Market Risk score of 47.7 out of 100 in our Operational Risk Index. This puts it in sixth place in SSA, between Mauritius and South Africa, and 7.1 points behind regional leader Ghana. Globally, Nigeria...

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Nigeria Logistics

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BMI View: Nigeria's attractiveness to investors is stymied by the country's poor logistics sector. The transport network suffers from undercapacity with delays prevalent, and the utilities sector is vastly inadequate and unable to keep pace with growing demand. Trade bureaucracy is elevated, further adding to the time and monetary cost of importing and exporting goods. Nigeria therefore receives a low overall score in BMI 's Logistics Risk Index, at 35.5 out of 100 ranking it 20th out of 44 Sub-Saharan African (SSA) countries.

Nigeria's utilities infrastructure is already overburdened, with the mains power and water supply failing to...

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Nigeria Trade & Investment

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BMI View: Nigeria's business environment faces a number of risks, ranging from corruption and a burdensome state bureaucracy to a weak legal framework that provides poor protection against intellectual property infringement. Nevertheless, Nigeria's oil and gas wealth facilitates strong trade volumes by regional standards, while a large domestic market and key government incentives boost the country's attractiveness as an investment hub in the region. Taking these factors into account, Nigeria sits in 17th place out of 44 countries in Sub-Saharan Africa (SSA) in BMI 's Trade and Investment Risk Index with a score of 36.9 out of 100. This puts the country between Madagascar and Kenya.

The greatest threat...

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Nigeria Industry Coverage (16)

Agribusiness

Nigeria Agribusiness

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BMI View: The 2014/15 cocoa harvest looks set to suffer from erratic weather conditions and outbreaks of disease, preventing farmers from capitalising on high prices. Slumping earnings from oil should reinforce the government's determination to rebuild the segment into an export powerhouse, but may test its capacity to finance ongoing regeneration schemes. The more challenging economic climate is expected to make its effects felt in other segments in the agribusiness complex, particularly insofar as climbing rates of inflation may dampen domestic demand for pork and poultry. Meanwhile, the Boko Haram insurgency drags on, impacting corn production in northern states and threatening the future of wheat production in Nigeria.

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Agribusiness Market Value
BMI Market Value By Commodity (2011-2019)

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Autos

Nigeria Autos

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This report was compiled in mid-March 2015, before the result of the Nigerian presidential election was known. BMI believes that a victory for incumbent President Goodluck Jonathan would be the most positive for the Autos sector in terms of maintaining continuity at a time when new industry policy is being implemented and major carmakers are committing investment. We have held the view since Jonathan came to power that his administration would be supportive of the industry, given that some government ministers were previously local officials in areas where automotive manufacturing collapsed and they experienced the economic and social effects first-hand.

The timing of the election is also important to the continued development of the production sector, as the government is hoping to have passed a bill by April requiring all carmakers that sell 10,000 units a year or more to invest in domestic production. Having this in...

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Commercial Banking

Nigeria Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Food & Drink

Nigeria Food & Drink

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BMI View: Our Africa Country Risk team does not expect weaker oil prices to have a major impact on headline GDP growth in Nigeria, as the non-oil sector will remain the primary engine of growth over the next few years, offsetting the weak contribution from the oil industry. Therefore, we do not expect the downward revision of our real GDP growth forecasts to 5.6% in 2015 (compared to 6.5% previously) to have a considerable impact on food and drink producers. Nonetheless, we expect weaker oil prices to indirectly weigh on private consumption through the inflation channel. With oil accounting for around 95% of Nigeria's exports, the fall in oil prices has led to deterioration in the sentiment of investors, importers and domestic banks towards the naira. Our Africa Country Risk team expects further devaluation from the central bank in 2015, which will lead to inflation...

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Freight Transport

Nigeria Freight Transport

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There will be strong growth in freight transport volumes in Nigeria in 2015 and beyond. Strong real GDP growth, increasing demand for consumer goods by an expanding middle class and a growing manufacturing sector will all raise intermodal container volumes. The country's ongoing population growth will power this. The growth in demand is driving investment into the sector, with substantial interest not only in developing new ports and expanding old ones, but also reinvigorating the country's dilapidated rail network. Road and air freight infrastructure are also seeing new investment.

Headline Industry Data

  • 2015 air freight tonnes-km forecast to grow by 10.7% and to average 9.6% to 2019.

  • 2015 port of Lagos tonnage throughput is forecast to increase by 5.9% and to average 5.3% to 2019.

  • 2015 rail freight tonnes-km to...

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Information Technology

Nigeria Information Technology

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BMI View: The oil-producing African nations draw a large portion of government revenues from petroleum exports, exposing them to the sharp decline in crude oil price in late 2014 and early 2015. BMI expects oil prices to remain depressed throughout our forecast period to 2019, with Nigeria to be among the most vulnerable markets to lower oil prices. This will weigh on public spending and private investment, including investments in new IT products and solutions.

Headline Expenditure Projections

Ghana

Computer Hardware Sales: GHS1.027bn in 2015 to GHS1.2bn in 2016, +16.8% in local currency terms. The government's ambitious Basic...

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Infrastructure

Nigeria Infrastructure

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BMI View : While we have downgraded our growth forecasts for 2015 and 2016 on account of the elections and lower oil prices , in our view Nigeria represents a long-term high reward market. We now forecast real growth of 11.04% and 9.80% in the construction sector for 2015 and 2016 respectively, with growth averaging 10.6% over our 10-year forecast period. Improving power supply and transport links will be a driver of growth, but the infrastructure sector is more exposed to the numerous risks...

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Insurance

Nigeria Insurance

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BMI View: The Nigerian insurance market remains at an embryonic stage of development with the combined assets of the country's insurers comprising only a tiny percentage of GDP and total premiums lagging behind more developed markets such as South Africa. That said, the past few years have seen considerable expansion in the sector, as rapid economic/population growth and rising prosperity have boosted demand for life and non-life products. However, future growth will be mitigated by currency market movements linked to falling oil prices.

By all measures, insurance remains a relatively undeveloped segment of Nigeria's financial services sectors, comprising just 0.3% of overall GDP in 2014 in terms of the value of gross premiums written. This low rate of penetration is reflective of a number of factors which have combined to undermine purchases of...

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Medical Devices

Nigeria Medical Devices

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BMI Industry View: Despite budget constraints, the Nigerian medical device market is exhibiting encouraging growth after several years of stagnation. Virtually all of the market is supplied by imports, which reached a high of USD154.4mn in 2013 and have continued to grow during the early part of 2014. The long term growth prospects of the Nigerian medical device market will be strongly influenced by the government's policies in regards to investment under the National Strategic Health Development Plan (2010-2015), the shortage of healthcare personnel and a need to effectively address the poor healthcare indicators of the country. The implementation of the National Health Bill, which has finally been given Presidential assent, is seen...

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Oil & Gas

Nigeria Oil & Gas

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BMI View : Taking into account staggering onshore production, continued instability and investment delays/cancellations due to regulatory uncertainty and the falling crude oil prices, we forecast Nigerian oil production to stagnate, from 2.41mn b/d in 2014 to a peak of 2.48mn b/d by 2020. Both downside and upside risk exists, largely depending on an improvement in the business environment, and the content and adoption of the PIB. Should the current situation endure without an adoption of the PIB, project investments and cancellations could see Nigerian production head downwards in the medium-to-longer term, as new production fails to offset decline rates at mature onshore and shallow-water fields. A more substantial increase in production is...

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Petrochemicals

Nigeria Petrochemicals

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Growth in gas production is set to spur downstream petrochemicals industries, particularly fertiliser and methanol, but BMI's latest Nigeria Petrochemicals report warns that the business environment remains uncertain and will no doubt be affected by the turbulence that comes with presidential elections, which are due in February 2015.

In 2014, Nigeria had olefins production capacities of 550,000 tonnes per annum (tpa) ethylene and 125,000tpa propylene with thermoplastic resins capacities of 240,000tpa linear low-density polyethylene (LLDPE) and 95,000tpa polypropylene (PP). Nigeria's petrochemicals sector is characterised by low capacity utilisation, frequently disrupted plant operations and a lack of proper resources to operate and maintain facilities.

The government is attempting to attract foreign direct investment (FDI) into the country's petrochemicals sector. However, a lack of skilled...

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Pharmaceuticals & Healthcare

Nigeria Pharmaceuticals & Healthcare

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BMI View: Nigeria's pharmaceutical and healthcare markets are vastly underdeveloped by Western standards as poor infrastructure, a weak regulatory system and lack of specialised facilities weaken growth potential. However, the Nigerian government's continuing efforts to expand healthcare access through national health insurance by introducing mobile registration and a community-based healthcare programme will provide revenue-earning opportunities for drug-makers. We believe developments along with new efforts to reduce the volume of counterfeit medicines in circulation will help boost pharmaceutical expenditure in the country.

Headline Expenditure Projections

  • ...

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Power

Nigeria Power

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BMI View: A victory for the PDP in Nigeria's 2015 presidential election would give incumbent Goodluck Jonathan's power sector reform efforts a shot in the arm. A win would enable Jonathan to proceed with his plans to liberalise the sector and plug a yawning capacity deficit. It might also reinvigorate plans to tackle gas shortages - the threat to the power sector.

The Nigerian power market will present significant opportunities for bold investors over our 10-year forecast period - underpinned by robust economic and demographic fundamentals...

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Shipping

Nigeria Shipping

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BMI View: Although Nigeria's wider economy is characterised by an overreliance on oil exports and lack of domestic productive capacity, the former does provide upside risk to our forecasts going forward, with Nigerian ports set to reap the benefits over the medium term.

Modest growth will be the order of the day in 2015 across Nigeria's main ports, with the port of Sapele set to lead the way in terms of year-on-year (y-o-y) growth (3.00%). Meanwhile, the country's largest port in Lagos is poised to register y-o-y gains of 2.00%, which is slightly below growth rates at the ports of Harcourt and Tincan Island (2.5% and 2.5%, respectively).

We have recently revised down our growth forecasts for Nigeria, to reflect our view that lower oil export revenue will...

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Telecommunications

Nigeria Telecommunications

Water

Nigeria Water

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BMI View: This quarter, we have maintained our forecasts, and continue to view the Nigerian water sector as extremely underdeveloped, with limited mains water access, extremely poor sanitation, and an incoherent regulatory system. However, over the longer term, we take a more positive view, and expect that the substantial investment into sanitation and mains distribution, as well as new regulations to prevent open defecation, should have a significant impact on the quality and availability of water in Nigeria.

Africa's need for infrastructure is well known, with the African Development Bank (AfDB) stating that the annual financing need for African infrastructure is about USD95bn, of which only USD45billion is...

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