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Nigeria Business Forecast Report Q2 2010

Published by: Business Monitor International

Published: Feb. 5, 2010 - 68 Pages


Table of Contents


Executive Summary
Headed For Constitutional Crisis?
Chapter 1: Political Outlook
Domestic Politics
Goodluck Jonathan Headed For Top Role
With little resolution on the question of President Umaru Yar’Adua’s health, Nigeria is on the edge of a bona fide
leadership vacuum.
Table: Political Overview
Chapter 2: Economic Outlook
economic activity
Re-assessing Prospects For Growth
In spite of an ongoing crisis in the banking sector, we are becoming more confident in the Nigerian economy’s
ability to post strong rates of expansion over the coming quarters.
Table: ECONOMIC ACTIVITY
Monetary Policy
Conundrum For CBN In 2010
With the Central Bank of Nigeria’s decision on January 5 to leave rates on hold at 6.00%, we raise the question of
how the bank will prioritise its dual mandate of ensuring price stability and safeguarding the financial system.
Table: MONETARY POLICY
Equities Outlook
Equities: Rational Exuberance Expected In 2010
While we see little chance that Nigerian equities will return to the record highs of 2007-2008, the strong start to
2010 suggest there may be some revival ahead, especially if the banking sector reforms now under way are a success.
Regional Outlook
Growth: V-Shaped Recovery In Store For 2010
We are forecasting regional real GDP growth in Sub-Saharan Africa (SSA) of 5.1% in 2010, which will almost mark
a return to trend following 2009’s trough.
Chapter 3: 10-Year Forecast
The Nigerian Economy To 2019
Infrastructure Investment Is Key
We are forecasting average annual real GDP growth of 7.4% over the next 10 years. We expect the Nigerian
government to prioritise investment in vital infrastructure through the end of our forecast period and beyond.
Table: Lon g-Term Macroeconomic Forecasts
Chapter 4: Special Report
Political Risk In The Next Decade
What To Expect In 2010-2019
Table: Countries Facing Major Leadership Succession In 2010-2019
Table: Countries At Risk Of Major Political Upheaval
Table: Countries At Risk Of Interst ate Conflict Or Heightened Bilateral Tension
Table: Count ries Facing Secess ion ist Or Autonomy Movements , Ins urgenc ies, Or Civil Wars
Table: Pivot al States
Chapter 5: Business Environment
Business Environment Outlook
TABLE: BMI BUSINESS AND OPERATIONAL RISK RATINGS
Institutions
TABLE: BMI LEGAL FRAMEWORK RATINGS
Infrastructure
TABLE: MIDDLE EAST & AFRICA, ANNUAL FDI INFLOWS
Market Orientation
TABLE: TOP EXPORT DESTINATIONS, US$MN
Operational Risk
Chapter 6: Key Sectors
Oil & Gas
Table: Nigeria Oil & Gas — Historical Data & Forecasts
Freight Transport
Table: Nigeria’s Freight Transport Indicators, 2006-2014
Chapter 7: BMI Global Assumptions
Global Outlook
2010 Looking Rosier
TABLE: GLOBAL AND REGIONAL REAL GDP GROWTH
TABLE: developed market exch ange rates
Table: Emerging Market Exch ange Rates
TABLE: GLOBAL ASSUMPTIONS
TABLE: DEVELOPED STATES
TABLE: EMERGI NG MARKETS

Abstract

Although the Nigerian economy has proven remarkably resilient to the global economic downturn,President Umaru Yar’Adua’s extended absence is threatening to plunge the country into politicalcrisis. At stake are the fragile amnesty with militants in the Niger Delta, the overhaul of the country’spetroleum industry, and the ongoing reforms in the banking sector, all of which are politicallycontentious and require strong leadership.

A lthough the constitution provides clear indications on how situations of presidential absencefrom offfice should be handled, a combination of unwritten rules and competing internal rivalrieswill make any action difficult. The most probable outcome, in our view, is that Vice President (VP)Goodluck Jonathan will become acting president, with the VP role filled by a candidate of Northernchoosing. This will, however, require that Yar’Adua’s ‘kitchen cabinet’ allow Jonathan to step intothe role, which will be a difficult move politically.

In spite of these problems, we are becoming more confident in the Nigerian economy’s ability topost strong rates of expansion over the coming quarters. Our view reflects a decision to accordmore importance to sectors that have been shown to impact the real economy, and less to thebanking sector, which has largely failed in channelling liquidity into productive investments. Wehave accordingly revised our real GDP growth forecast for 2010 from 6.4% to 7.5%.T here are a number of business environment issues facing Nigeria over the coming quarters, notleast the resolution of the long-delayed petroleum industry bill (PIB). At the time of writing, the PIBwas stalled in the National Assembly while negotiations with Nigeria’s international partners hadjust resumed under the authority of Vice President Goodluck Jonathan. With a number of issuesstill in the balance, however, there is little indication of how and when a potential resolution wouldbe reached. A second, long-standing challenge for the government will be channelling greaterinvestment into the power sector, the deficiency of which has become a major obstacle for theexpansion of local businesses.

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