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
Real GDP growth in Nigeria will be weak in 2016 - we forecast a 3.1% expansion - as the naira peg and capital controls will continue to weigh on economic activity through the course of the year, exacerbating the global oil price slump's effects on the Nigerian economy. While 3.1% growth would mark an acceleration on 2015's 2.8%, it is nevertheless a downward revision from our previous forecast of 3.6%. This revision is due to delays to the planned expansionary budget and a recent data release, which has shown the extent to which businesses are being hampered by capital controls.
The Nigerian government's move to secure USD6bn in loans from China signals two things: strengthening relations with the Asian giant and a reluctance to comply with the stipulations on economic policy which would likely have accompanied an IMF loan. Relatedly,...
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: Our view on the Nigerian agribusiness sector is mixed. 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...
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: Despite a weak economic and consumer outlook, Nigeria's food and drink industry will grow over 2016. Over our forecast period, economically priced products will outperform as strained consumers trade down price points to mitigate rising costs. Favourable demographics and a sizeable middle-class cohort will bolster growth throughout our forecast period.
|Food and Drink Spending|
|e/f = BMI estimate/forecast. Source: BMI, national statistics|
Key Trends & Industry Developments...
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: The IT markets in Ghana, Kenya and Nigeria all contracted sharply in 2014 and 2015 as a depression in the commodities complex hurt economic performance and resulted in steep currency depreciation against the US dollar that eroded already weak purchasing power. This was as a reality check on previous optimism regarding their economic growth trajectory and IT markets, as a lack of structural and institutional strength was laid bare. The fortunes of the three markets are not however tied that closely, with Ghana and Nigeria more susceptible to further negative shocks in the short-term if the commodities markets take another turn downwards. However, under our core scenario we envisage improved performance over the medium term for all three markets, but caution that there is a long way to go before the rapid growth of IT spending observed in the higher income emerging markets is replicated in Sub-Saharan Africa....
B MI View: A combination of tight liquidity restricting business operations and renewed violence in the Delta region exacerbating the government's struggle in raising adequate revenue to undertake major infrastructure spending has seen our forecasts for the construction sector be heavily revised downwards. Chinese credit will be a key lifeline for growth, although will not benefit the whole industry.
Latest Updates And Structural Trends
We forecast just 1.1% y-o-y real growth in Nigeria's construction sector over 2016, based on the dire state of the wider economy and the lack of liquidity in the banking sector causing projects to grind to a halt. 2017 will see stronger growth forecast at 7% as the economy settles and a pickup in Chinese financing, following the agreement of a USD6bn...
BMI View: Despite of being small in scale at present, Nigeria's insurance sector has significant growth potential and is well-placed to expand rapidly in the foreseeable future, as rising disposable income and a growing middle class provide an uptick in demand for key consumer lines. These factors will render the Nigerian market increasingly attractive to foreign investors - whose presence will likely increase market consolidation as well as accelerate product innovations.
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: A deteriorating security situation in the Niger Delta has forced us to knock 600,000b/d off our 2016 oil production forecast and unless resolved, the longer-term consequences for investment will be dire. While there have been some notable reforms to the NNPC, there is still a long way to go in order to create a transparent and profitable company that encourages investment and helps Nigeria reach its hydrocarbon potential.
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: Nigeria's pharmaceutical market will continue to be viewed as a high-risk proposition for multinational pharmaceutical companies. Rampant corruption, coupled with widespread drug counterfeiting and poor pharmaceutical regulations governing the market will not bode well for investor sentiment. This is having a detrimental impact on the population's access to healthcare, with reforms to the National Health Insurance Scheme looking uncertain. Despite the difficulties faced, the National Drug Law Enforcement Agency's efforts to improve drug standards and regulations will have a positive - albeit limited - impact on the market.
Headline Expenditure Projections
BMI View: The ongoing economic malaise has compounded our already negative outlook for the Nigerian power sector. We expect a combination of sabotage to gas pipelines, a scarcity of access to foreign exchange and a lack of liquidity in the distribution segment to weigh on much-needed private investment in the sector - entrenching slow growth in capacity and generation.
BMI View: We remain below consensus on Nigeria's real GDP growth prospects for 2016 and have revised our forecast downwards to 3.1% (from 3.6%). Inflation rose to 12.8% in March 2016, from an average 9.0% last year and it will remain high over the remainder of the year, averaging 11.3%, according to our forecasts. This supports our view that consumer spending patterns are unlikely to change, with essentials spending remaining at around three quarters of total household income, and any increases in non-essentials spending being driven primarily by the highest-earning Nigerian households.
|Headline Household Spending|
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 continue to have a positive outlook for the Nigerian mobile market and the country's telecoms sector in general. This is despite an increasingly challenging economic climate which, in Q116, saw a 0.4% contraction in real GDP - largely attributable to falling crude prices and oil production. Subscription growth in the mobile market continues to be driven by factors including operators' promotional activities, multiple SIM ownership and the extension of network coverage to underserved areas. Meanwhile broadband penetration remains very low. There continues to be significant demand for traditional voice and data services, and to a large extent this demand has remained untapped.
Latest Updates And Industry Developments
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...