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.
Nigeria Country Risk
Nigeria will continue to struggle with its readjustment to low oil prices, and some policies being pursued by the president and the Central Bank will further constrain growth in the near term. We forecast a real GDP expansion of 3.8% in 2016.
The CBN will maintain the key policy rate at 13.00% at the next Monetary Policy Committee meeting in December, as concerns over weak real GDP growth will come to the fore. We believe that the bank's more unorthodox policies must also be relaxed if growth is to be maintained.
Nigeria's current account balance will remain in deficit in 2016, as exports will fail to recover from the 2014 oil price collapse. The deficit will narrow from 2015, however, as an inevitable naira devaluation will limit imports.
Five months into the Buhari Presidency,...
Nigeria Operational Risk Coverage (9)
Nigeria Operational Risk
Nigeria Operational Risk
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, along with the country's severe fuel shortages. 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 inflows and economic growth.However, since the 2015...
Nigeria Crime & Security
Nigeria Crime & Security
BMI View: Crime and security risks in Nigeria are driven by the severe and rising threat of terrorist attacks, high levels of violent crime throughout the country and endemic corruption. Organised criminal groups are highly active in the country, and businesses are exposed to the threat of piracy attacks, financial fraud and cyber crime. Nigeria's military remains the largest in the region, but has only been able to reduce Boko Haram's territorial hold within Nigeria's borders with international assistance. While the recently elected President Buhari is on an anti-corruption drive in terms of fighting state and private sector corruption, these efforts have yet to significantly improve the capability of Nigeria's army and police for fighting terrorism and crime. Therefore, Nigeria receives a score of...
Nigeria Labour Market
Nigeria Labour Market
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 offerings at the country's educational institutions, especially for 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...
BMI View: Nigeria's attractiveness to investors is stymied by the country's poor logistics sector, strained by the country's severe fuel crisis. 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 34.4 out of 100 ranking it 22nd out of 48 Sub-Saharan African (SSA) countries....
Nigeria Trade & Investment
Nigeria Trade & Investment
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. Nigeria's oil and gas wealth has facilitated 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. However, the global fall in oil prices is straining the government's budget which relies heavily on oil and gas exports, slowing economic growth and public investment. Taking these factors into account, Nigeria sits in 17th place out of 48 countries...
Nigeria Industry Coverage (17)
BMI View: We take a mixed view of the Nigerian agribusiness sector. The cocoa industry assumes a greater importance in the country's medium-term economic future now that oil revenues can no longer be relied upon as an easy source of foreign exchange. We remain cautiously optimistic that cocoa plantations and processing facilities will continue to receive the public and private sector support needed to move forward. Poultry, dairy, sugar, rice and wheat consumption are expected to continue to depend very largely on imports to meet demand, although a much greater percentage of demand for each of these commodities (apart...
BMI View: Renewed vehicle production under the government's new automotive policy will see high average growth of 39% in vehicle production over our forecast period to 2019. However, vehicle sales growth will be dragged down by high import tariffs over our forecast period.
|Vehicle Production Expansion Set To Take Off|
|e/f = BMI estimate/forecast. Source: BMI|
Nigeria Commercial Banking
|Date||Total assets||Client loans||Bond portfolio||Other||Liabilities and capital||Capital||Client deposits...|
Food & Drink
Nigeria Food & Drink
BMI View: Nigeria's economy will continue to grow at a constrained rate due to the oil price collapse. Our growth forecasts for Nigeria in 2015 and 2016 are 3.8% and 2.7% respectively. The long-term outlook is impacted by the difficulties of implementing policies that facilitate a transition to a growth model that is not driven by oil. Nigeria's reliance on imported consumer goods coupled with the devaluation of the naira will result in high inflation in the short-term; we forecast it to end the year at 9.7%. This will weigh heavily on consumption.
Headline Industry Forecasts
Per capita food consumption (local currency) 2015 = 62,698; forecast compound annual growth...
Nigeria Freight Transport
BMI View: We forecast strong growth across all freight modes in Nigeria in 2016 and beyond. Increasing demand for consumer goods by an expanding middle class and manufacturing sector will raise intermodal container volumes. Population growth means growth in demand will continue, driving investment into the freight sector, with substantial interest in developing the country's dilapidated rail network in addition to investment in the road and air freight infrastructure. We forecast a real GDP expansion of 3.8% in 2016 while Nigeria continues to struggle with its readjustment to low oil prices. Some policies being pursued by the president and the Central Bank will further constrain growth in the near term.
Economic growth in Nigeria will be weighed down by foreign exchange controls, an overvalued naira and policy...
Nigeria Information Technology
BMI View: IT markets in Ghana, Kenya and Nigeria all experienced a sharp downturn in 2014 and 2015 as a result of the downturn in commodity and oil markets, and general increase in negative sentiment towards emerging markets. This served as a reality check on optimism regarding their economic growth trajectory and IT markets as a lack of structural and institutional was laid bare. This resulted in a significant reassessment of both historical data and our growth forecast for all three IT markets in the Q116 update, with all three markets receiving significant downgrades and classified as long-term rather than medium term opportunities for vendors. The outlook is however by no means uniform, with Nigeria expected to underperform due to a reliance on oil exports that will be a drag throughout the forecast period. In contrast...
B MI View: Our outlook for Nigeria's construction and infrastructure sectors has dimmed further over 2015 and we have lowered our real growth forecasts for 2016 as a result. The reform momentum in the sector has waned following President Buhari's slow appointment of a cabinet. Furthermore, the economic outlook in the country has soured as unorthodox monetary policy, currency weakness and poor sentiment following the collapse in oil prices means investors are taking a wait and see approach.
Latest Updates And Structural Trends
We forecast the Nigerian construction sector will grow 7.8% y-o-y in real terms during 2016. Over the long-term, Nigeria retains strong infrastructure fundamentals and over our 10-year...
BMI View: We have a positive outlook for both Nigeria's life and non-life insurance segments over the coming years. Key growth drivers reside in the country's improving economic conditions, which means that with rising incomes and a growing middle class, increasingly more Nigerians will be able to afford long-term and short-term insurance contracts as their rates of auto and home ownership increase. We note, however, that currency movements due to falling oil prices and national security issues may weigh on the growth potential of life and non-life premiums.
Nigeria Medical Devices
BMI Industry View: With its large population and underdeveloped healthcare sector, Nigeria offers substantial long-term potential for medical device companies, particularly as virtually all of the market is supplied by imports. In the medium term, inadequate funding will remain a major constraint. Positive factors such as the National Health Bill and World Bank investment in maternal and child health, will be offset by uncertain economic prospects and the slow uptake of...
Oil & Gas
Nigeria Oil & Gas
BMI View: The APC administration will partially reduce crude theft and instability in the Niger Delta, marginally improving production consistency. We do not expect the PIB to be passed over the coming one to two years. This will see continued regulatory uncertainty in Nigeria, supporting our view for a stagnation in oil output over the coming years. Nigerian oil production will increase slightly from 2.45mn barrels per day (b/d) in 2016 to 2.51mn b/d by 2020, based on sanctioned projects.
BMI View: Nigeria remains the most significant sub-Saharan African market, in terms of size, growth and future potential. Growth in gas production is set to spur downstream petrochemicals industries, particularly fertiliser and methanol and under the Buhari administration the business environment has improved, even though the decline in oil prices and the depreciation of the naira have had a negative effect.
In 2015, 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.
Pharmaceuticals & Healthcare
Nigeria Pharmaceuticals & Healthcare
BMI View: We uphold our subdued outlook for Nigeria's pharmaceutical and healthcare market this quarter. Nigerian drugmaker performance will remain somewhat stagnant in the short term in line with weaker domestic demand as a result of the economic downturn and regional legislation incentivising imports. Over the long term, government intervention will result in an uptick in demand for domestically produced pharmaceuticals, creating competition for multinational generic drugmakers.
Headline Expenditure Projections
Pharmaceuticals: NGN170.28bn (USD1.03bn) in 2014 to NGN175.89bn (USD880mn) in 2015; +3.3% in local currency terms and -14.7% in US dollar terms. Forecast in line with last quarter.
BMI View: We expect private investors in Nigeria's power sector to defer much-needed investment in new generation capacity due to uncertainty over the ongoing electricity sector liberalisation process and a deepening economic malaise. Both sector-specific and economic factors are likely to deter private investors, who will ultimately be needed if Nigeria is to bridge its huge electricity infrastructure gap.
BMI View: Nigeria's output will continue to expand, albeit at a lower rate due to turmoil in the commodities markets. We forecast modest household income growth, which will have a very limited impact on consumption patterns. Most households will be able to purchase only consumer staples, which will keep essentials spending at an exceptionally high level of 75.3% for the next four years.
Nigeria's economy has recorded respectable year-on-year economic growth over the past decade. We currently forecast real GDP growth in 2015 to reach 3.6%, remaining at the same level throughout 2016. The country has a relatively stable political environment and rich natural resources support, which support our long-term outlook for Nigeria's economy. As such, the country's economic growth has started to benefit a number of households, with a rising urban middle-class becoming...
BMI View: In 2016, we anticipate the outperformer in terms of tonnage throughput growth will be Port Harcourt once more, with the facility set to register double-digit gains. With the African giant very much dependent on oil production as a key export, it is fairly unwelcome news that a decline in proven oil reserves demonstrates the impact of lower levels of exploration activity in the country since 2005. Exploration will remain slow without significant improvements in regulatory certainty and the security situation, which will temper output at Nigerian ports as a result.
Port Harcourt is poised to take the top spot ahead of the port of Sapele (6.24%) and the port of Apapa (5.2%) in 2016. Nigeria's second largest port by tonnage throughput terms, the port of Tincan Island, will, however, see lower y-o-y growth than its domestic peers over the next 12 months, ending the year with y-o-y...
BMI View: We hold a positive and favourable outlook for the Nigerian mobile market and the telecommunications sector as a whole. Mobile penetration topped 82% in Q315 and broadband penetration still remains very low. There remains significant demand for traditional voice and data services that has gone thus far untapped. A rapidly maturing tower market will enable operators to extend networks into rural areas more cost effectively, while allocation of wholesale Infraco licences will ensure investment into next generation broadband networks. However, there are important industry and external risks to smooth growth. Nigeria's government has twice postponed 4G spectrum auctions and has requested a report investigating the sale of incumbent telecoms operator NITEL, which will delay investment into wireline and mobile data networks. Meanwhile, power shortages, a weaker economic outlook amid lower oil prices and...
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...