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: 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: 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 volatility of demand in low-value and undeveloped IT markets such as those in Ghana, Kenya and Nigeria were underlined by the sharp downturn in 2014 and 2015. The decline in commodity and oil markets, and general increase in negative sentiment towards emerging markets resulted in currency depreciation and erosion of purchasing power and sentiment, which was a negative shock in small and highly price-sensitive markets. This served as a reality check on optimism regarding their economic growth trajectory and IT markets as a lack of structural and institutional strength was laid bare. We expect improved performance over the medium term, 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...
B MI View: We have marginally downgraded our short-term outlook for the Nigerian construction sector as continued uncertainty over the direction of the naira, monetary policy and oil prices sees private sector projects remain on hold. Infrastructure on the other hand will largely continue to see buoyant growth on the back of a expansionary 2016 federal budget, although power sector projects will be subject to similar headwinds as we are seeing in the residential and non-residential building sector.
Latest Updates And Structural Trends
We marginally lowered our overall construction industry outlook for 2016 and 2017 forecasts to 7% and 10% y-o-y real growth respectively, largely due to the residential and non-residential sector underperforming. Over the long...
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: 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: Nigeria's prospects of attaining national health coverage will largely depend upon the success of the National Health Act. This, however, will continue to face a number of challenges that have previously led to delays in its implementation. The eventual rollout of the act will make Nigeria an attractive prospect for multinational drugmakers over the long-term, though political and fiscal barriers limit the successful likelihood of its implementation and subsequent investment opportunities.
Headline Expenditure Projections
Pharmaceuticals: NGN175.90bn (USD891mn) in 2015 to NGN187.33bn (USD905mn) in 2016; +6.5% in local currency terms and +1.6% in US dollar terms. Forecast revised upwards from last quarter.
BMI View: An economic crisis, unorthodox monetary policy and concerns about a devaluation of the naira will deter foreign investment in Nigeria's power sector. This will stall government efforts to plug the power generation deficit with private capital, with investors likely to delay market entry until Nigeria comes to terms with a painful economic adjustment to lower oil prices.
BMI View: Nigeria's economy has recorded respectable year-on-year economic growth over the past decade and we currently forecast real GDP growth in 2016 to reach 3.6%. With modest growth likely in household incomes, consumer spending patterns are unlikely to change and most households will be able to purchase only consumer staples. This will keep essentials spending at the exceptionally high level of 75.3%, with any increases in non-essentials spending being driven primarily by the 5.3% of Nigerian households inhabiting the USD50,000+ income bracket.
|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 have a positive outlook for the Nigerian mobile market and the country's telecoms sector in general. We now estimate that mobile penetration was just over 80% at the end of 2015. 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.
A rapidly maturing tower market will enable operators to extend networks into rural areas more cost effectively, while allocation of wholesale broadband infrastructure licences will ensure investment into next generation broadband networks. However, there are several industry and external risks to sustained growth. The government has twice postponed 4G spectrum auctions and has requested a report investigating the sale of incumbent telecoms...
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...