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Nigeria Country Risk Reports Q2 2015

Nigeria Country Risk Reports Q2 2015

Core Views

Presidential elections on February 14 will be the most closely fought since Nigeria's return to democracy in 1999. While a victory for incumbent President Goodluck Jonathan and his ruling Peoples Democratic Party (PDP) is the most likely outcome, victory is not assured. Regardless of outcome, we expect little major deviation in policy trajectory given the personality-based nature of Nigerian politics.

Currency concerns will be the central issue for the Central Bank of Nigeria in 2015. Following aggressive tightening of monetary policy in November, we believe that further tightening measures will be necessary to anchor inflation expectations and reassure jittery markets.

The economic outlook for Nigeria has deteriorated. While we maintain our broad view that falling oil prices will not have a major impact on headline GDP growth given the predominance of the non-oil sector, some pass through now seems inevitable.

The new era of lower oil prices raises serious questions over Nigeria's fiscal sustainability. Substantive and politically-unpalatable spending cuts will be needed if the country is to prevent a fiscal crisis unfolding over the next few years.

Major Forecast Changes

We have made substantive changes to our macroeconomic forecasts for Nigeria in the wake of falling oil prices.


Executive Summary
Core Views
Major Forecast Changes
Key Risks To Outlook
Chapter 1: Political Outlook
SWOT Analysis
BMI Political Risk Index
Domestic Politics
Political Challenges To Endure Regardless Of Poll Outcome
Nigeria's presidential elections scheduled for February 14 are set to be tightly-contested and volatile. While a victory for incumbent
President Goodluck Jonathan is the most likely outcome, a united opposition and the president's waning popularity could see a run-off
triggered.
Long-Term Political Outlook
Inequality, Corruption And Militancy Pose Long-Term Challenges
Nigeria's stability continues to be undermined by competition for political and economic power between various ethnic, political and
geographical groups. The best-case scenario over the next 10 years is for a slow but steady move to a stable democracy. A more likely
outcome, however, would be a continuation of the fragility that has prevailed since 1999. Although unlikely, a major collapse of the state
cannot be ruled out.
Chapter 2: Economic Outlook
SWOT Analysis
BMI Economic Risk Index
Economic Analysis
Oil-Driven Currency Woes To Weigh On Growth
The economic outlook for Nigeria has deteriorated. While we maintain our broad view that falling oil prices will not have a major impact
on headline GDP growth given the predominance of the non-oil sector, some pass-through now seems inevitable. We have made
downward revisions to our expectations for real GDP growth in 2015 and 2016.
table : Economic Acti vit y
Monetary Policy
Oil Prices To Dictate Monetary Policy In 2015
Currency concerns will be the central issue for the Central Bank of Nigeria in 2015. Following aggressive tightening of monetary
policy in November, we believe that further tightening measures will be necessary to anchor inflation expectations and reassure jittery
markets.
Table : Monetar y Polic y
Fiscal Policy
Fiscal Risks To Rise Sharply On Lower Oil Prices
Plummeting oil prices pose a major threat to Nigeria's fiscal sustainability. Substantive and politically-unpalatable spending cuts will be
needed if the country is to prevent a fiscal crisis unfolding over the next few years.
table : Fiscal Polic y
Regional Outlook
Key Themes Of 2015
Political risk, much of which is associated with elections, will be a key issue for the Sub-Saharan Africa region in 2015 as will the West
African Ebola epidemic. Lower oil prices will have a meaningful impact on the macroeconomic environment with net oil importers
benefitting while exporters suffer. Lower oil prices will also encourage easy monetary policy in Japan and the eurozone, which will help
markets that rely on portfolio inflows. Loose monetary policy will also lead to a continuation of eurobond issuance as means to cover
fiscal deficits.
table : ELECTION TIMETABLE, 2015
Chapter 3:10-Year Forecast
The Nigerian Economy To 2024
Power Sector Key For Long-Term Productivity
Despite being measured from a higher base following the recalculation of GDP in early 2014, Nigeria's economy will grow by around
7.0% per year over the next 10 years thanks to increasing productivity in the non-oil sector. Although the oil sector will not contribute
much to headline growth, it will be crucial to macro economic stability as it will remain the most important source of export and fiscal
revenues. Major risks to the economy include a deterioration in the security situation, a fall in oil prices and/or production, and slowerthan-
expected improvement in the power sector.
Table : Long -Ter m Macr oec onomic Forecasts
Chapter 4:Operational Risk
SWOT Analysis
Operational Risk Index
Operational Risk
table : Operati onal Ris k
Availability Of Labour
table : Sub -Saharan Africa – Availabilit y Of Lab our Ris k
table : Top 10 Source Countries For Migrant Workers
table : Lab our Force Empl oyment By Sector
Crime Risk
table : Sub -Saharan Africa – Cri me Ris ks
Table : Cri me Statistics
Chapter 5: Key Sectors
Autos
table : Aut os Total Mar ket – Hist orical Data & Forecasts
Food & Drink
table : Food Consu mpti on Indicators – Hist orical Data & Forecasts
table : Alc oholic Drin ks Value /Volu me Sales , Producti on & Trade – Hist orical Data & Forecasts
Other Key Sectors
table : Oil & Gas Sector Key Indicators
table : Phar ma Sector Key Indicators
table : Telec oms Sector Key Indicators
table : Infrastructure Sector Key Indicators
table : Freig ht Key Indicators
Chapter 6: BMI Global Assumptions
Global Outlook
New Era For Oil
Table : Global Assu mpti ons
Table : Devel oped States , Real GDP GrowtH , %
Table : BMI VERSUS BLOOM BERG CONSENSUS REAL GDP GROWTH FORECASTS, %
Table : Emerging Mar kets , Real GDP Growt h, %

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