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

  • The clear-cut victory for Muhammadu Buhari in Nigeria's presidential election represents a significant maturing of the country's democratic political system.

  • With a strong mandate and an ambitious reform agenda, President-elect Muhammadu Buhari and his All Progressives Congress (APC) are well poised to make early progress on some of the major structural challenges facing Nigeria. Whether or not this momentum will be sustained over a multi-year horizon is far less certain.

  • Despite the smooth passing of the election, we expect economic growth to slow in 2015 and 2016 as the economy adjusts to the harsh reality of lower oil prices. Private consumption and public expenditure will be particularly hard hit.

  • The new era of lower oil prices raises serious questions over Nigeria's...

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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, 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...

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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 26th out of 48 Sub-Saharan African (SSA) states in the BMI Crime And Security Risk Index, with a score of 32.7 out of 100. However, we note that the only countries in...

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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 50.3 out of 100 in our Operational Risk Index. This puts it in fourth place...

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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, 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 34.5 out of 100 ranking it 22nd out of 48 Sub-Saharan African (SSA) countries.

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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. 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...

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Nigeria Industry Coverage (17)

Agribusiness

Nigeria Agribusiness

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BMI View: One of the last acts of the outgoing administration has been to revise the target for a ban on rice imports from 2015 to 2017. While not a hugely surprising or significant move in itself, it is emblematic of the gap between the government's ambition and its delivery on agricultural policy. Nigeria continues to import as much as two-thirds of the rice it consumes and is even more reliant on wheat and sugar imports to meet burgeoning domestic demand. However, it would be churlish to deny the genuine progress that has been made under the Minister of Agriculture, Akinwumi Adesina: the cocoa sector has received much needed attention in the form of improved seedlings and distribution...

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Autos

Nigeria Autos

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Over the past quarter, BMI has become considerably more negative on the near-term outlook for the Nigerian new car sales market. We are now targeting a 20% decline in new car sales for 2015.

There are several reasons behind the sharp downgrade to our Nigerian auto sector forecasts. On the economic side, the devaluation of the naira in late 2014 and the slump in global oil prices over late 2014/early 2015 both weighed heavily on the Nigerian economy over H115. On the political side, there was significant uncertainty ahead of the March 2015 presidential elections, which were won by challenger Muhammadu Buhari. According to Jim Dando, the general manager of export operations for Nissan South Africa, auto sales plunged by about 30% over the December 2014 to March 2015 period, as cited by Canada's Globe and Mail newspaper in March 2015.

Although many foreign carmakers...

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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: Despite the smooth passing of the election, we expect economic growth in Nigeria to slow in 2015 and 2016 as the economy adjusts to the harsh reality of lower oil prices. Private consumption and public expenditure will be particularly hard hit. We believe that Nigerian consumers are yet to feel the full effects of the 20% naira devaluation late last year and, with further depreciation to come, there will be increased pain for consumers over the coming quarters. We forecast real private consumption growth to slow considerably; from an estimated 7.5% in 2014, to 4.0% in 2015 and 3.0% in 2016. Our Africa team expects inflation to be in the double digits in 2015, which will erode consumers' purchasing power and weigh on food and drink sales.

Headline Industry Forecasts

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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 grow...

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Information Technology

Nigeria Information Technology

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BMI View: Ongoing investments in datacentres, broadband networks, the development of e-government services and IT companies' launch of internet of things platforms will underpin the particularly strong growth in the IT software and services segments in Ghana, Kenya and Nigeria over the five years to 2019. However, the still low penetration of computers means that the hardware segment will remain the largest contributor to all three countries' IT markets. Despite risks of lower commodities prices constraining government budgets, we expect the public sector to remain the largest spender on IT products and solutions, while consumer-facing industries such as financial services, telecoms, and retail, including e-commerce, to drive private sector IT spending.

Headline Expenditure Projections...

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Infrastructure

Nigeria Infrastructure

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BMI View : Despite the peaceful passing of the Nigerian election, we remain cautious in our forecasts for real growth in the Nigerian construction sector over 2015 and 2016. Our forecasts stand at 11% and 9.80% for 2015 and 2016 respectively, with growth averaging 10.6% over our 10-year forecast period to 2024. President-elect Buhari faces severe macroeconomic headwinds, which will weigh on growth, but his rhetoric on reform to PPPs and tackling corruption bodes well for the long-term attractiveness of the infrastructure sector to investors.

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Insurance

Nigeria Insurance

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BMI View: In spite of low penetration levels, Nigeria's life and non-life insurance segments are set to grow at high single-digit to double-digit rates through the next years. The country's favourable economic prospects, leading to rising household spending, and rapidly growing population will produce a strong boost in demand for life and non-life products, which will attract more foreign insurance companies and consequently increase the level of competitiveness within both markets. Importantly, however, investors should be mindful of potential challenges which reside mainly in currency movements due to falling oil prices as well as national security issues.

Accounting for roughly 34% of total written insurance premiums, and a penetration rate of 0.1% (ie, life premiums as a percentage 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 : 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 2.40mn barrels per day (b/d) in 2014 to 2.48mn b/d by 2020, based on sanctioned projects.

Headline Forecasts (Nigeria 2013-2019)
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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 community-based approach to its health insurance scheme will increase the programme's penetration. We believe that this decentralisation of health services will achieve increasing coverage among the population, driving demand for pharmaceuticals and healthcare services. Successful implementation of the National Health Act by new president Muhammadu Buhari will be key to the development of the sector and bolster its attractiveness to multinational drugmakers. However, the devaluation of the Nigerian naira will continue to dampen the market over the coming years.

Headline Expenditure Projections

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Power

Nigeria Power

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BMI View: President Muhammadu Buhari's efforts to sustain reform momentum in Nigeria's power sector will require him to tackle major structural issues and attract private investment into power provision. Overcoming gas supply bottlenecks and securing investment in TCN will be necessary to build an integrated power supply chain and sustain private investor interest in generation assets.

President-elect Muhammadu Buhari and his All Progressive Congress (APC) party's comprehensive victory in the April 2015 election grant him a strong platform from which to implement his ambitious reform agenda. Having taken a commanding majority in both the upper and lower houses of Nigeria's bicameral National Assembly, we expect Buhari to make early progress on stated policies such as petroleum industry reform, boosting fiscal accountability, tackling corruption and reforming the...

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Retail

Nigeria Retail

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BMI View: Increasingly sophisticated consumer lifestyles, urbanisation and double-digit economic growth are helping to drive retailing growth in Nigeria. We are forecasting steady growth in household spending, which we expect to average a respectable 10.16% over our forecast period. Government initiatives are also helping support retail expansion, with infrastructural improvements making the country increasingly attractive to international retailers.

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 4.2%, slowing slightly to 4.3% in 2016. The country has a relatively stable political environment, combined with rich natural resources support and this is helping support out long-term outlook for Nigeria's economy. As such, the country's economic growth has started to benefit...

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Shipping

Nigeria Shipping

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BMI View: Despite the fact that total trade is on the decline in Nigeria at present, and has been since 2011, the country's main ports are, however, set to experience healthy enough growth over the short to medium term.

The outperforming Nigerian port in terms of year-on-year (y-o-y) growth is set to be Port Harcourt (7.45%), which takes the top spot slightly ahead of the port of Apapa (7.27%) and the port of Sapele (7.13%) in 2015. Nigeria's second largest port by tonnage throughput terms, the port of Tincan Island, will, however, have a poor 12 months, ending the year with y-o-y growth of just 0.45%.

Crude petroleum is by far and away Nigeria's largest exported good and so the news that there will be lower oil export revenue will lead to a reduction in both private consumption and fixed investment...

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Telecommunications

Nigeria Telecommunications

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BMI View: BMI forecasts strong growth for Nigeria driven by multitude of factors such as operator's promotional activities, multiple SIM ownership and expanding into underserved rural areas. However, operators are cautioning that fuel shortages and heightened risk of insurgency will be a significant risk factor to the mobile growth. Further to this, auctions for additional spectrum have been postponed twice already and as of June 2015 it appears as if they will be postponed once more. This could dampen our 4G outlook.

Key Data

  • Mobile subscriptions grew by 3.5% quarter-on-quarter (q-o-q) in Q414, bringing total growth in 2014 to 9.4%.

  • Mobile ARPU dropped by 0.4% in Q414.

  • The fixed-line sector contracted by 3.9% in Q414, but expanded by 6.5% y-o-y in December 2014...

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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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